A strong management team and sound investment process underpin Invesco S&P Emerging Markets Low Vol ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating.  Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low volatility exposure is rooted in stocks that have a lower 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.

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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. Invesco S&P Emerging Markets Low Vol ETF earns an Above Average Process Pillar rating. 

The leading factor in the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Strong risk-adjusted performance also supports the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 42%. 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 modest success ratio suggests that the firm could do better across its fund lineup.

 This strategy skews toward smaller, deeper value companies than its average peer in the Diversified Emerging Mkts Morningstar Category. Analyzing additional factors, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt 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 financial services and utilities relative to the category average by 15.0 and 3.5 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 19.2 and 4.7 percentage points of assets, respectively. The portfolio is positioned across 206 holdings and is less top-heavy than peers. Specifically, 8.2% of the portfolio's assets are concentrated within the top 10 fund holdings, compared to the category average's 25.3%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 71% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Invesco’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are four managers listed on the fund: Michael Jeanette, Peter Hubbard, Tony Seisser, Pratik Doshi. The team is well equipped, with an average of 12 years of portfolio management experience. Together, they manage a total of 144 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. This group has successfully retained management talent, with no departures in the past five years. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Average

Parent

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