The combination of a middling Process Pillar rating and a Low People Pillar rating limit  Optica Rare Earths & Critical Matrls ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The team managing the passive strategy earns a Low People Pillar. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in quality exposure and yield exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The strategy's parent organization still has a way to go to reach the industry standard, evidenced by a lack of inside investments from portfolio managers and a relatively inexperienced portfolio management team. As a result, the firm obtains a Below Average Parent Pillar rating.

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Optica Rare Earths & Critical Matrls ETF earns an Average Process Pillar rating. The most substantial contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Low costs across its parent firm's funds, whose fees, on average, rank in the middle quintile of their respective category, also influence the rating. The pattern of low expenses at the firm indicates that it is focused on delivering strong results for investors. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 0%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that correspond generally to the total return performance of the EQM Rare Earths & Critical Materials Index.  The fund invests in securities comprising the index. The index is comprised of companies that (i) generate at least 50% of their revenue from Rare Earths and Critical Materials Companies or (ii) engage in projects that have the potential, when developed, and to generate 50% of revenue from Rare Earths and Critical Materials Companies. The fund will invest at least 80% of its net assets in securities of Rare Earths and Critical Materials Companies. The fund is non-diversified. 

 The portfolio is overweight in energy by 5.8 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are basic materials and utilities, with basic materials underweighting the average portfolio by 6.2 percentage points of assets and utilities similar to the average. The portfolio is positioned across 55 holdings and is quite concentrated. More concretely, 62.0% of the strategy's assets are housed within the top 10 holdings, versus the typical peer's 36.3%. And finally, in terms of portfolio turnover, on a year-over-year basis, 35% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Exchange Traded Concepts’s team receives a Low People Pillar rating. The number one detractor from the rating is the experience of the management team, which averages four years at this fund. Turnover at its parent firm also detracts from the team. The firm's asset-weighted manager tenure of four years suggests it could do more to retain portfolio managers. The parent firm's five-year success ratio of 0% further weakens the team. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

People

Exchange Traded Concepts lags peer asset managers in a number of stewardship qualities, resulting in a Below Average Parent Pillar rating. Portfolio managers at Exchange Traded Concepts tend not to invest alongside their shareholders, detracting from the overall stewardship assessment. None of the firm’s assets are covered by an invested manager. A notable weakness of Exchange Traded Concepts is the inexperience of its longest-tenured managers compared with other asset managers. Managing capital through a full market cycle is a challenging prospect for seasoned managers, but with only four years of average asset-weighted tenure, there's cause for concern. The firm charges fees on its open-end and exchange-traded funds that are on par with category peers. On average, fund fees on its products fall in the middle quintile, giving it neither an advantage nor disadvantage compared with the competition.

Below Average

Parent

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Optica Capital, a strategic and innovative financial firm that designs, launches, and manages themed indexes, launched its first exchange traded fund, the Rare Earths and Critical Materials ETF (NYSE Arca: CRIT). Tracking the EQM Rare Earths and Critical Materials Index (CRITNTR), CRIT features many of the minerals and materials deemed by governments worldwide as being [.

Optica Capital Launches Rare Earths and Critical Materials ETF

PERTH, Australia--(BUSINESS WIRE)--Optica Capital, a strategic and innovative financial firm that designs, launches and manages themed indexes, announces the launch of its first exchange-traded fund (ETF), the Rare Earths and Critical Materials ETF (NYSE: CRIT). Tracking the EQM Rare Earths and Critical Materials Index (CRITNTR), CRIT features many of the minerals and materials deemed by governments worldwide as being critical to their economic and national security. The ETF will give investors

Optica Capital Launches Rare Earths and Critical Materials ETF (NYSE: CRIT)

News for Optica Rare Earth & Critical Materials ETF ETF (CRIT)