Weakness in Global X Emerging Markets ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The management team doesn't personally invest much alongside shareholders. This is a large contributor to the strategy's Below Average People Pillar. The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable overweight position in liquidity exposure and has a significant underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more 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.

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Global X Emerging Markets ETF earns a Below Average Process Pillar rating. 

The rating is limited by the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of six years suggests it could do more to retain portfolio managers. The parent firm's five-year risk-adjusted success ratio of 28% also weakens the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy skews toward smaller, more growth-oriented companies than its average peer in the Diversified Emerging Mkts Morningstar Category. Examining additional factor exposure, this strategy has held more highly liquid stocks 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 has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility 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 consumer cyclical by 13.3 percentage points in terms of assets compared with the category average, and its technology allocation is similar to the category. The sectors with low exposure compared to category peers are consumer defensive and communication services, underweight the average by 5.9 and 3.0 percentage points of assets, respectively. The strategy owns 78 securities and is relatively concentrated. In particular, 38.8% of the strategy's assets are housed within the top 10 holdings, compared with the category’s 25.3% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 56% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

Global X Emerging Markets ETF earns a Below Average People Pillar rating. The team benefits from the combined average five-year excess return of each manager, which suggests that the funds they manage have surpassed an average manager. However, the rating is held back by the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of six years suggests it could do more to retain portfolio managers. The rating is also held back because no manager has invested more than $1 million the fund, which would show confidence in the strategy.


The team is backed by Rahul Chadha, the longest-tenured manager on the strategy, who brings 18 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 3.0 stars, demonstrating average risk-adjusted performance compared with 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.

People

Mirae Asset Global Investments is a Korean asset manager and a key player in the Asian financial market. It is a wholly owned subsidiary of Mirae Asset Financial Group, founded by Hyeon Joo Park. Park’s leadership and entrepreneurial spirit have been the driving force behind the global rise of Mirae, and he holds a majority stake in the business. 
Mirae Asset has grown significantly over the years (USD 198 billion as of December 2022) across a diversified platform, of which about 60% of assets are managed in South Korea. We believe that Mirae’s core mutual fund business in the Asia-Pac region is relatively strong. It has a collaborative structure, a strong and large investment team, low manager turnover, competitive fees, and a disciplined approach to product-development pointing toward better stewardship practices relative to peers in these markets. However, this is in stark contrast to its exchange-traded fund business, which accounts for 41% of the total assets. 
The firm’s ETF lineup focuses largely on high-risk thematic strategies that seem gimmicky, emphasizing short-term asset-gathering. The firm appears to leverage trending topics such as robotics and artificial intelligence, virtual reality and gaming, and cloud computing. There’s a notable concern regarding the potential liquidation of these funds since they seem to be designed around investment fads. Furthermore, these products are often expensive, especially compared with broadly diversified index funds and ETFs. Unsurprisingly, Mirae's reflexive product-development strategy has led to an increase in fund closures.
Our experience engaging with the MAGI team to gather critical information for the parent assessment has not been as positive. It hasn’t been as transparent in its disclosures, and unlike its peers, its responsiveness has been inadequate. We prefer firms with a more transparent corporate culture. Overall, these actions hold us back, and the firm retains its Parent Pillar rating of Average.

Average

Parent

Global X Emerging Markets ETF

EMM is an actively managed fund focusing on long-term capital growth through investments in emerging market companies, across all sizes, considered future leaders within their respective markets, while excluding Chinese companies.

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