The combination of a middling Process Pillar rating and a Low People Pillar rating limit  Freedom 100 Emerging Markets ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The team managing the passive strategy earns a Low People Pillar. The strategy merits an Average Process Pillar rating.  Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. 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 a competitive lineup success ratio and a strong risk-adjusted track record.

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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. Freedom 100 Em Mkts ETF earns an Average Process Pillar rating. The leading factor in the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Low expenses across its parent firm's funds, whose fees, on average, rank in the cheapest quintile of their respective category, also contribute to the process. The pattern of low expenses at the firm indicates that it is focused on delivering strong results for investors. Lastly, the process is limited by the experience of the management team, which averages two years at this fund.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the total return performance, before fees and expenses, of the Freedom 100 Emerging Markets Index (the "index").  Under normal circumstances, and at least 80% of the fund's total assets (exclusive of collateral held from securities lending) will be invested in the component securities of the index or in depositary receipts representing such component securities. The index is designed to track the performance of a portfolio of approximately 100 equity securities in emerging market countries. The fund is non-diversified. 

 The portfolio is overweight in basic materials and technology relative to the category average by 7.5 and 6.5 percentage points, respectively. The sectors with low exposure compared to category peers are energy and communication services, underweight the average by 4.8 and 3.0 percentage points of assets, respectively. The portfolio is composed of 121 holdings and is quite concentrated. In particular, 42.1% of the portfolio's assets are housed within the top 10 holdings, as opposed to the typical peer's 25.3%. And finally, in terms of portfolio turnover, on a year-over-year basis, 15% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Freedom Day Solutions’s team receives a Low People Pillar rating. The primary detractor from the rating is the instability of management across its parent firm. The firm's asset-weighted manager tenure of two years suggests it could do more to retain portfolio managers. Management team experience, which averages two years at this fund, also detracts from the team. The turnover of its management team hinders the team further. Specifically, the fund last had a manager change one year ago.

People

In a competitive industry, Freedom Day Solutions doesn't differentiate itself enough, leading to an Average Parent Pillar rating. The firm has had encouraging initial results among its product shelf. Its three-year success ratio is 100%, meaning that 100% of the products have both survived and beaten their respective category median. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. Freedom Day Solutions has accumulated a stellar risk-adjusted track record across its open-end and exchange-traded funds, with an average three-year Morningstar Rating of 4.0 stars. An average tenure of only two years among the longest-tenured managers at Freedom Day Solutions is concerning. In isolation, seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions.

Parent

Freedom 100 Emerging Markets ETF

FDRM tracks an index that selects and weights exposure to emerging market equities based on personal and economic freedom metrics.

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