Weakness in SGI Enhanced Global Income ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. 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 Low People Pillar. The strategy earns a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight momentum exposure and quality exposure compared with category peers. Momentum exposure is attributed to holding stocks currently on a winning streak and selling those that are on a downtrend. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. Even though the strategy's parent organization has some investor-friendly attributes like substantial personal investments from managers, unattractive fees holds it back. As a result, the firm obtains a Low Parent Pillar.

Analyst Rating

Apple

Alphabet

UnitedHealth Group

JPMorgan Chase & Co

Merck

Civitas Resources

Mastercard

Chord Energy Corp

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. SGI Enhanced Global Income ETF earns a Low Process Pillar rating. 

The predominant detractor from the rating is the parent firm's five-year risk-adjusted success ratio of 20%. 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 relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 67% also detracts from the process. High costs across its parent firm's funds, whose fees, on average, rank in the second-costliest quintile of their respective category, detract from the rating as well. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep costs down.

 This strategy, over time, has preferred smaller market-cap companies, compared with others in the Global Large-Stock Value Morningstar Category.  But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Analyzing additional factors, this strategy has continually had exposure to high-momentum stocks compared with Morningstar Category peers in the last few years. Momentum is based on the premise that stocks that have recently outperformed will continue to outperform, and those that have underperformed will stay behind. In recent months, the strategy was more exposed to the Momentum factor compared with its Morningstar Category peers as well. This strategy also has had a defensive tilt, with exposure to higher-quality stocks compared with peers in recent years. This means that the fund holds companies that are profitable, growing, and have solid balance sheets. Though it may trail peers during an economic boom, this orientation contributes to helping it weather periods of economic stress better. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield 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 communication services and technology relative to the category average by 7.4 and 3.5 percentage points, respectively. The sectors with low exposure compared to category peers are real estate and basic materials, underweight the average by 6.3 and 6.1 percentage points of assets, respectively. The portfolio is composed of 158 holdings and is quite concentrated. More concretely, 30.7% of the fund’s assets are housed within the top 10 holdings, compared to the typical peer's 14.2%.

Process

SGI Enhanced Global Income ETF earns a Low People Pillar rating. The main detractor from the rating is the parent firm's five-year success ratio of 20%. 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 subpar 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 parent firm's five-year retention rate of 67% detracts from the rating further.


The team is backed by Aash Shah, 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 1.9 stars, reflecting below-average risk-adjusted performance relative to category peers. Despite having a small team, the two listed managers boast 20 years of listed portfolio management experience. 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.

People

In an increasingly competitive industry, Summit Global falls behind on a number of key metrics, resulting in a Low Parent Pillar rating. Despite the negative rating, an area of strength of the firm is manager investment.  Over 33% of the firm's assets are covered by invested managers, in an effort to align portfolio manager and shareholder interests. Open-end and exchange-traded fund fees are a weakness at the firm, contributing negatively to the rating. On average, the firm charges fees on its funds that are in the second most-expensive quintile of category peers. With the current market environment of fee compression, this is cause for concern, as investors may flock to alternate asset managers over time to get a better deal. On average, Summit Global's longest-tenured portfolio managers have accrued 11 years of tenure. This level of manager experience should give investors confidence in the group's ability to handle differing market conditions.

Parent

SGI Enhanced Global Income ETF

GINX actively manages a portfolio of global companies while employing a put-and-call options strategy. The fund seeks to generate income from dividends and selling short-term options.

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Summit Global Investments Continues ETF Expansion with Launches of SGI Enhanced Global Income ETF (Ticker: GINX) & SGI Enhanced Core ETF (Ticker: USDX)

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