Strength in Kovitz Core Equity ETF's People Pillar is partially offset by an Average Process Pillar rating, leading to a Morningstar Medalist Rating of Neutral. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-highest quintile among peers.  

 The strategy gets an Average Process Pillar. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and an 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 management team's large personal investment in the strategy helps it earn an Above Average People Pillar rating. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including modest portfolio manager turnover but is held back by a disappointing average Morningstar Rating.

Analyst Rating

Alphabet

Amazon

Charles Schwab

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Philip Morris

American Express

Becton, Dickinson and Co.

Jacobs Solutions Inc

Visa

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. Kovitz Core Equity ETF earns an Average Process Pillar rating. 

The main driver of the rating is the firm's five-year retention rate of 100% over the period. The stability of the management team also bolsters the process. Specifically, the fund has not seen a manager change in the last 12 years. Lastly, the process is limited by high costs across its parent firm's funds, whose fees rank in their category's highest-cost quintile on average. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep expenses down.

 This strategy tends to pick smaller market-cap firms compared with the average fund in its peer group, the Large Blend Morningstar Category.  But in terms of style (value/growth) exposure, it is similar. Analyzing additional factors, this strategy has held more highly liquid stocks 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 experience 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 has also favored low-quality stocks. This means the fund avoids 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. 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. Such exposure tends to pay off when markets are hot and to be costly when they are not. 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 financial services and consumer cyclical relative to the category average by 12.6 and 6.3 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and technology, underweight the average by 8.5 and 7.2 percentage points of assets, respectively. The portfolio is composed of 42 holdings and is diversified among those holdings. In its most recent portfolio, 41.0% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category’s 49.5% average. And in closing, in terms of portfolio turnover, this portfolio's holdings turn over more often than comparable products in its peer group, possibly resulting in higher costs for investors and a drag on performance.

Average

Process

Kovitz Core Equity ETF earns an Above Average People Pillar rating. The main contributor to the rating is the firm's five-year retention rate of 100%. The stability of the management team also influences the rating. Specifically, the fund has not seen a manager change in the last 12 years. Lastly, the rating is limited by the parent firm's five-year success ratio of 0%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.


The team is backed by Mitchell A. Kovitz, the longest-tenured manager on the strategy, who provides over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 1.0 stars, demonstrating underwhelming risk-adjusted performance. Mitchell A. Kovitz is supported by an experienced team, being able to draw on three additional listed managers, who average 21 years of listed portfolio management experience. With at least one manager investing $1 million or more in this offering, investors can have some assurance that the team's interests are aligned with theirs.

Above Average

People

Kovitz has some investor-friendly attributes, but other attributes warrant caution, leading to an Average Parent Pillar rating. Portfolio management turnover has been minimal at the firm over the past five years. Long-term stability indicates a strong investment culture. In terms of risk-adjusted performance, the Kovitz open-end and exchange-traded funds fall short of competitors, with an average three-year Morningstar Rating of 2.0 stars.

Parent

Kovitz Core Equity ETF

EQTY is a narrow, core equity portfolio of companies believed by the adviser to be high quality and undervalued. The actively managed fund invests in large- and mid-cap companies around the globe.

Chicago-based Investment Advisory and Wealth Management Firm Converts Mutual Funds CHICAGO , Dec. 12, 2022 /PRNewswire/ -- Kovitz Investment Group Partners, LLC ("Kovitz"), an independently-managed investment advisory and value-oriented wealth management firm based in Chicago, is pleased to announce the launch of a new actively managed exchange-traded fund, Kovitz Core Equity ETF (NYSE Arca: EQTY).  As part of today's launch, Kovitz converted its existing mutual funds – Green Owl Intrinsic Value Fund (GOWLX) and Marathon Value Portfolio (MVPFX) – into the new ETF along with over $500 million of assets from separately managed accounts.

News for Kovitz Core Equity ETF ETF (EQTY)