The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Madison Dividend Value ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Below Average 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 underweight position in liquidity exposure and has a considerable overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

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AbbVie

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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. Madison Dividend Value ETF earns an Average Process Pillar rating. 

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 55%. 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 stability of talent across its parent firm also bolsters the rating. The firm's asset-weighted manager tenure of 21 years demonstrates its ability to retain portfolio managers. Lastly, the process is limited by its parent firm's risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.0 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy sticks with larger market-cap firms compared with the average fund in its peer group, the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Examining additional factor exposure, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy also has had a defensive tilt, with exposure to higher-quality stocks compared with peers in recent years. This means that the fund holds companies that are profitable, growing, and have solid balance sheets. Such holdings could cause it to trail peers during economic booms, but help it better withstand busts. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. In recent months, the strategy also had less Volatility factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in industrials and energy relative to the category average by 8.1 and 3.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer defensive, underweight the average by 6.1 and 4.5 percentage points of assets, respectively. The strategy owns 40 securities and is quite concentrated. More concretely, 37.4% of the fund’s assets are housed within the top 10 holdings, versus the category’s 27.4% average.

Average

Process

Madison Dividend Value ETF earns a Below Average People Pillar rating. The team is supported by the strategy's reasonable costs, with fees that rank in its category's middle quintile. However, the rating is weakened by the parent firm's five-year success ratio of 39%. 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 subpar success ratio suggests that the firm could do better across its fund lineup. The size of its portfolio management team also limits the team, with only two portfolio managers at the helm.


John Brown’s veteran status, with 15 years of listed portfolio management experience, brings a wealth of experience to the table. They are currently not managing any other investment vehicles, with their focus devoted to this strategy. 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

Madison Investments boasts some strengths, but they are not enough to stand out in a fiercely competitive arena of active management. It maintains an Average Parent rating.

This almost half-century-old firm is on solid footing, with over $22 billion in assets under management as of December 2022, grounded in a healthy institutional business (roughly three fourths of its AUM lie here) and a growing models-delivery business. The firm's small but experienced investment team is composed of long-tenured managers who have considerable investment in their strategies and some ownership in the firm, which encourages retention. 

Madison has evolved in some ways. After a five-year stint as CEO, Paul Lefurgey relinquished the role in 2022 as Madison moved back to an executive committee management structure, which it had previously used. Longtime distribution head Steve Carl chairs the committee, and Lefurgey remains a CIO. Madison has also made changes to its performance-based remuneration plan moving to a revenue-sharing target model, with a percentage based off five- and 10-year performance. 

But it underwhelms in some important respects. It levies fees ranking no better and mostly worse than its peers', and its small investment team lacks depth. Overall, the firm is an adequate but not exceptional steward.

Parent

Madison Dividend Value ETF

DIVL uses an active approach to invest in stocks from around the globe. The fund seeks current income and capital appreciation by targeting stocks with favorable dividend yields that appear undervalued.

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News for Madison Dividend Value ETF ETF (DIVL)