The combination of a middling Process Pillar rating and a Low People Pillar rating limit  Aptus Defined Risk ETF to a Morningstar Medalist Rating of Negative.  Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-highest quintile among peers.  

 The strategy's management team is about as experienced as others, but due to other weaknesses, the strategy earns a Low People Pillar. The strategy earns an Average Process Pillar rating.  The strategy's parent firm has some investor-friendly attributes, like a competitive lineup success ratio, but it is held back by low portfolio manager retention. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

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Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Aptus Defined Risk ETF earns an Average Process Pillar rating.    The most important driver of the rating is the parent firm's five-year risk-adjusted success ratio of 100%. 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 process is limited by the instability of talent across its parent firm. The firm's asset-weighted manager tenure of four years suggests it could do more to retain portfolio managers.

 Compared with other funds in the Short-Term Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the average strategy in the category, the managers have been meaningfully overweight corporate bonds in recent years. In the latest month, the strategy has relatively overweighted corporate bonds compared with its peers as well. Additionally, there's been a notable overweight bias towards A rated bonds over the past few years. Compared with category peers, the strategy had more exposure to A rated bonds in the most recent month. Finally, during the past few years, the fund leaned meaningfully away from debt with 15- to 20-year maturities. Nevertheless, the fund's debt with 15- to 20-year maturities exposure was in line with peers in the latest month.

 This strategy's 12-month yield is 3.4%, lower than its average peers' 3.7%. In addition, it has a 3.1% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, a lower yield comes with the benefit of less credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio has a lower average credit rating of BBB, compared with the category average's A and it holds no non-investment-grade assets, despite the average peers' 2%. Lower quality bonds have higher yields but come with more risk.

Average

Process

Aptus Defined Risk ETF earns a Low People Pillar rating. The primary detractor from the rating is the turnover of management across its parent firm. The firm's asset-weighted manager tenure of four years suggests it could do more to retain portfolio managers. The managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns, also limits the team. The experience of the management team, which averages five years at this fund, detracts from the rating as well.

People

APTUS ETFs's track record as a steward is mixed, leading to an Average Parent Pillar rating. Longevity at the firm has been impressive. Its five-year risk-adjusted success ratio is 100%, meaning that 100% of the products have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. APTUS ETFs has undergone a bout of turnover in the past five years, as seen in its lower-than-average portfolio manager retention. This is a concern, as long-term stability tends to support positive results. APTUS ETFs's longest-tenured managers do not possess comparable experience as teams at other firms, a cause for concern. Specifically, average tenure within the firm is four years. As such, there is less confidence in the group's ability to manage capital through a full market cycle effectively.

Parent

Aptus Defined Risk ETF

DRSK is an actively-managed fund that combines US corporate bond exposure with an overlay of call options on US large-cap stocks. The fund seeks income and capital appreciation.

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