The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Tactical Advantage ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Below Average People Pillar. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in the Europe-Developed region and has a considerable underweight in the communication services sector compared with category peers. The strategy's parent organization is industry standard, albeit with some strong attributes like overall attractive fees and minimal portfolio manager turnover. This earns the firm an Average Parent Pillar rating.

Analyst Rating

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Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, clearly defined, repeatable execution. Tactical Advantage ETF earns an Average Process Pillar rating. The largest contributor to the rating is the firm's five-year retention rate of 100% over the period. The size of the portfolio management team also reinforces the process. With three portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by the experience of the management team, which averages eight years at this fund.

 Its equity sleeve is consistently tilted toward both smaller market-cap and value-oriented companies versus the category average. The strategy has three region or sector biases compared to category peers. The most notable is its consistent underexposure to the Developed Europe region. It also sustains an underweight position in the communication services sector. And finally, in the fund's most recent portfolio, more assets were allocated to developed markets regions. Although, this bias has not existed over time. 

 The portfolio is overweight in industrials and energy relative to the category average by 9.0 and 6.3 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 6.3 and 5.3 percentage points of assets, respectively. The portfolio is overweight in North America by 12.4 percentage points compared with the category average, and Emerging Europe's allocation is similar to its peers. The regions with low exposure compared to their category peers are Developed Europe and United Kingdom, with Developed Europe underweight the average by 5.3 percentage points and United Kingdom similar to the average.

 The fund’s bond sleeve takes on more credit risk but remains less exposed to interest rate risk relative to peers. In particular, the strategy has an average credit rating of B versus the category midpoint of BBB but has a shorter average duration of 0.5 year versus the average of 5.1 years.

Average

Process

Tactical Advantage ETF earns a Below Average People Pillar rating. The team is supported by the firm's five-year retention rate of 100%. However, the rating is limited by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns. The number of months that the management team has been running this vehicle together also holds the rating back. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.


None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

Below Average

People

A short track record, in this case only 10 months, is usually cause for caution when evaluating asset managers. However, Tactical Advantage has displayed qualities that suggest it can be trusted as much as the next asset manager, earning it an Average Parent Pillar rating. The firm currently manages one vehicle across a bench of three strategy managers.  The firm's earliest portfolio manager hire, Charles A. Ragauss, has 11 years of industry experience but has not been an industry standout on other strategies. 
 
 A pocket of strength is the firm’s low fees on its open-end and exchange-traded funds, demonstrating a firmwide commitment to minimizing costs and maximizing investors’ returns. The average net expense ratio for its funds is within the cheapest quintile of asset managers.  

 As Tactical Advantage builds and continues to develop a track record, its rating will be adjusted accordingly.

Parent

Tactical Advantage ETF

FDAT is an actively managed fund-of-funds, aiming for capital appreciation by investing in equity and high-yield bond ETFs. The fund attempts to reduce return volatility and downside risk by shifting the portfolio's ETF exposure into cash through a proprietary multi-factor strategy.

Family Dynasty Advisors has confirmed the launch of the Tactical Advantage ETF (NYSE Arca: FDAT), an actively managed “fund-of ETFs” that targets ETFs that primarily invest in U.S. equity securities or high-yield bonds.

News for Tactical Advantage ETF ETF (FDAT)