Despite People Pillar weakness and an Average Process Pillar, ProShares S&P Kensho Cleantech ETF gets enough right to retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including overall low fees but is held back by an unfavorable lineup success ratio.

Analyst Rating

Tesla

Arcosa Inc

General Electric

Eos Energy Enterprises

Cummins

Nextracker Inc - Ordinary Shares - Class A

Array Technologies

Plug Power

Bloom Energy

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. ProShares S&P Kensho Cleantech ETF earns an Average Process Pillar rating. The main contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The fund's concentrated portfolio, with its top 10 holdings accounting for 40% of assets, strengthens the process. High-conviction picks court the risk of blowing up, but can also drive outperformance. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 43%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low 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 results, before fees and expenses, that track the performance of the S&P Kensho Cleantech Index (the “index”).  The fund invests in financial instruments that ProShare Advisors believes, in combination, should track the performance of the index. The index selects companies focused on building the technologies or products that enable the generation of clean energy, such as solar, wind, geothermal, hydrogen, and and hydroelectric. The fund will invest in all of the component securities of the index in approximately the same proportion as the index. It is non-diversified. 

 The portfolio is overweight in industrials and utilities relative to the category average by 41.4 and 3.1 percentage points, respectively. The sectors with low exposure compared to category peers are technology and communication services, underweight the average by 30.3 and 8.3 percentage points of assets, respectively. The strategy owns 33 securities and is diversified among those holdings. In its most recent portfolio, 40.2% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 48.5%. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

Average

Process

ProShares’s team receives a Below Average People Pillar rating. The team benefits from the strategy's fees, which rank in its category's cheapest quintile. A higher expense ratio reduces net returns, so low costs give this team an advantage. However, the rating is limited by the parent firm's five-year success ratio of 32%. 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 modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 58% also weakens the team.

Below Average

People

In a competitive industry, ProShares doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One notable advantage of ProShares is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the cheapest quintile of category peers. ProShares fails to showcase longevity across its product shelf, as evidenced by its five-year success ratio. Over this time period, only 32% of its roster has been able to both survive and beat its respective category median. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. Despite other redeeming qualities as a firm, ProShares has seen some disruption among its portfolio management ranks in the past five years, denoted by elevated turnover compared to peer asset-management firms. Long-term stability tends to support positive results.

Parent

Proshares S&P Kensho Cleantech ETF

CTEX tracks an index of US-listed companies involved in the development of technologies that enable clean energy generation. Holdings are equally-weighted within tiers.

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