Weakness in AdvisorShares DW FSM All Cap World ETF's People and Process Pillar ratings limits this strategy 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 most expensive quintile among peers.  

 The team managing the strategy earns a Below Average People Pillar. The strategy gets a Below Average Process Pillar rating.  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 still has a way to go to reach the industry standard, evidenced by a bench of relatively inexperienced portfolio managers and high portfolio manager turnover. As a result, the firm obtains a Low Parent Pillar rating.

Analyst Rating

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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. AdvisorShares DW FSM All Cap World ETF earns a Below Average Process Pillar rating. 

The process benefits from the experience of the management team, which averages 22 years at this fund. However, the rating is held back by the parent firm's five-year retention rate of 15%, which suggests it could do more to retain its portfolio managers. The parent firm's five-year risk-adjusted success ratio of 50% also holds the rating back. 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.

 This strategy, over time, has preferred smaller market-cap companies, compared with others in the Large Blend 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. Analyzing additional factors, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to suffer from a significant loss. 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 contributes to 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 has taken on exposure to high-momentum stocks in these years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In this month, the strategy also had more exposure to the Momentum 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 technology and communication services relative to the category average by 19.1 and 7.0 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and healthcare, underweight the average by 10.4 and 5.7 percentage points of assets, respectively. The strategy has only reported a handful of holdings, and is in a category where the typical fund has approximately 48.8% of assets concentrated in the top 10 holdings. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 151% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

AdvisorShares DW FSM All Cap World ETF earns a Below Average People Pillar rating. The team benefits from the experience of the management team, which averages 22 years at this fund. However, the rating is limited by the turnover 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. The parent firm's five-year success ratio of 50% also limits the team. 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 subpar success ratio suggests that the firm could do better across its fund lineup.

People

AdvisorShares fails to meet industry-standard stewardship qualities, culminating in a Low Parent Pillar rating. A notable weakness of AdvisorShares is the inexperience of its longest-tenured managers compared with other asset managers. Managing capital through a full market cycle is a challenging prospect for seasoned managers, but with only about four years of average asset-weighted tenure, there's cause for concern. A detractor from the firm's rating is its lower-than-average portfolio management retention over the past five years, as elevated turnover bears watching. The firm's risk-adjusted performance compares similarly to competitors. Across all open-end and exchange-traded funds, the firm's average five-year Morningstar Rating is 3.5 stars, which is about standard.

Parent

AdvisorShares DWA FSM All Cap World ETF

DWAW is an actively managed fund of funds that follows a proprietary rules-based momentum strategy and seeks long-term capital appreciation.

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