Weakness in FT Energy Income Partners Strategy ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Neutral. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Below Average People Pillar. The strategy earns a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable underweight position in liquidity exposure and quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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

Exxon Mobil

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Kinder Morgan

National Fuel Gas

ONEOK

EOG Resources

Sempra Energy

DT Midstream

KeyCorp

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. FT Energy Income Partners Strategy ETF earns a Below Average Process Pillar rating. 

The process benefits from low costs across its parent firm's funds, whose fees rank in their respective category's second-cheapest quintile on average. The pattern of low expenses at the firm indicates that it is focused on delivering strong results for investors. However, the rating is limited by the parent firm's five-year risk-adjusted success ratio of 29%. 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. The parent firm's disappointing risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.7 stars, also detracts from the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy leans toward smaller, more value-oriented companies than its average peer in the Equity Energy Morningstar Category. Examining additional factor exposure, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in 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. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, this strategy has exhibited a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. 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 utilities by 10.8 percentage points in terms of assets compared with the category average, and its communication services allocation is similar to the category. The sectors with low exposure compared to category peers are energy and technology, with energy underweighting the average portfolio by 6.8 percentage points of assets and technology similar to the average. The strategy owns 78 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 44.3% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 51.9%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 19% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

FT Energy Income Partners Strategy ETF earns a Below Average People Pillar rating. The team benefits from the stability of the management team. Specifically, the fund has not seen a manager change in the last one year. However, the rating is held back by the parent firm's five-year success ratio of 39%. 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 modest success ratio suggests that the firm could do better across its fund lineup. The managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns, also weakens the team.


The team is backed by James J. Murchie, the longest-tenured manager on the strategy, who brings 18 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.5 stars, demonstrating above-average risk-adjusted performance relative to category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 15 years of listed portfolio management experience. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

People

First Trust meets the industry standard for stewardship, but it could do more to align itself with investors. It earns an Average Parent rating.

This is a team-oriented organization that eschews star managers. While exchange-traded funds represent the bulk of the firm's assets, First Trust bypasses the competitive market for low-cost beta funds, instead opting for complex strategies with higher management fees. However, the firm's focus on ETFs for future product development underpins its commitment to tax efficiency and transparency. Some of its thematic strategies appear trendy, but it stands behind them and rarely liquidates funds. 

The firm is a private partnership, controlled by Jim Bowen, the CEO. Many senior managers are limited partners. This ownership structure helps the firm stay focused on the long term and promotes retention, which has been strong for the investment team. The firm has grown considerably over the past decade and is among the largest providers of actively managed ETFs, as well as unit investment trusts. As it has grown, the firm has expanded its investment team and beefed up its technology infrastructure.

First Trust's focus is on educating advisors and providing them solutions. This may benefit investors indirectly, but First Trust could do more to directly align with investors by cutting fees and limiting trendy strategies.

Average

Parent

FT Energy Income Partners Strategy ETF

EIPX seeks risk-adjusted total return through an actively managed portfolio of global stocks in the energy sector, as broadly defined by the funds sub-adviser.

Exchange traded fund provider and asset manager First Trust Advisors announced the launch of the FT Energy Income Partners Strategy ETF (NYSE Arca: EIPX), which begins trading on the New York Stock Exchange today.

News for FT Energy Income Partners Strategy ETF ETF (EIPX)