BrandywineGLOBAL Dyn US Lrg Cap Val ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in liquidity exposure and has an overweight in volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Lockheed Martin

Comcast

ConocoPhillips

Marathon Petroleum

Aflac

Cisco Systems

Deere & Company

Chevron

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. BrandywineGLOBAL Dyn US Lrg Cap Val ETF earns an Average Process Pillar rating. 

The most significant contributor to the rating is the stability of the management team. Specifically, the fund has not seen a manager change in the last nine years. Management team experience, which averages 28 years at this fund, also strengthens the process. Lastly, the process is limited by its parent firm's inferior risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.5 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy tends to hold smaller, deeper value companies than its average peer in the Large Value Morningstar Category. Examining additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This is a higher-risk, higher-reward approach. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. In this month, the strategy also had more exposure to the Yield factor over 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 consumer cyclical relative to the category average by 14.8 and 8.9 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and technology, underweight the average by 11.6 and 9.7 percentage points of assets, respectively. The portfolio is composed of 112 holdings and is quite concentrated. Specifically, 35.2% of the strategy's assets are housed within the top 10 holdings, versus the category average of 27.4%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 52% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

BrandywineGLOBAL Dyn US Lrg Cap Val ETF earns an Average People Pillar rating. Henry F. Otto, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, demonstrating average risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of over 25 years of listed portfolio management experience. As a team, they manage two investment vehicles together, with a Neutral asset-weighted average Morningstar Medalist Rating, indicating the team will struggle to deliver positive alpha in aggregate. 

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

People

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Parent

Brandywineglobal Dynamic US Large Cap Value ETF

DVAL is actively managed to hold a portfolio of US large-cap value companies. Stocks are selected using a proprietary multi-factor approach.

DVAL: Now An ETF, This Top Performing Large Cap Value Fund Has My Attention

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Franklin Templeton has been building out its ETF lineup through product development, mutual fund conversions, and acquisitions. While it had $10 billion in U.S.-listed ETF assets at the end of November, aided by $1 billion of net inflows, the firm has ambitions of being a much larger player in the space.

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Joining a key trend in the ETF space, Franklin Templeton announced Monday that it launched two converted ETFs, growing its actively-managed US large-cap value and international growth lineups.

News for Brandywineglobal Dynamic US Large Cap Value ETF ETF (DVAL)