Weakness in iMGP DBi Hedge Strategy ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy merits a Low Process Pillar rating. The strategy's manager investment level is lacking and is one of the reasons behind its Below Average People Pillar rating. The strategy's parent organization still has a way to go to reach the industry standard, evidenced by a bench of relatively inexperienced portfolio managers and a low success ratio across its lineup. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. iMGP DBi Hedge Strategy ETF earns a Low Process Pillar rating. 

The predominant detractor from the rating is the parent firm's five-year risk-adjusted success ratio of 33%. 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 parent firm's five-year retention rate of 75% also holds the rating back. Lastly, being an actively managed strategy detracts from the process. Historical data, such as Morningstar's Active/Passive Barometer, shows that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 The investment strategy as stated in the fund's prospectus is as follows:

The investment seeks long-term capital appreciation.  The fund invests in long and short positions in exchange-traded futures contracts across the broad asset classes of equities, fixed income, and currencies. The advisor expects, under normal circumstances, to invest a large portion of the portfolio in investment grade debt securities in order to collateralize its derivative investments, for liquidity purposes, or to enhance yield. It may hold fixed income instruments of varying maturities, and but that have an average duration of less than one year. The fund is non-diversified. 

 In terms of portfolio turnover, on a year-over-year basis, 0% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Process

iMGP DBi Hedge Strategy ETF earns a Below Average People Pillar rating. The team benefits from the portfolio managers' outperformance of peers at the funds they run, as measured by their combined three-year manager excess returns. However, the rating is limited by the parent firm's five-year success ratio of 33%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. The number of months that the management team has been running this vehicle together also holds the rating back.


Andrew Beer’s veteran status, with 12 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, demonstrating average risk-adjusted performance. Despite having a small team, the two listed managers boast 12 years of listed portfolio management experience. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

Below Average

People

In an increasingly competitive industry, iM Global falls behind on a number of key metrics, resulting in a Below Average Parent Pillar rating. With an average tenure of seven years among the longest-tenured managers at iM Global, the firm is on par with peers. Seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions. iM Global strategies have failed to have lengthy success. In particular, the firm's three-year success ratio demonstrates that only 30% have both survived and beaten their respective category median. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. iM Global has had high portfolio management turnover over the past five years compared with peers, detracting from its rating, as long-term stability tends to go together with positive results.

Parent

iM DBi Hedge Strategy ETF 

DBEH is an actively managed fund that seeks to model the performance of long/short equity hedge fund strategies via US futures contracts. The fund seeks long-term capital appreciation.

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