The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  Goldman Sachs Small Cap Core Equity 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 strategy receives a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and an overweight in volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

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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. Goldman Sachs Small Cap Core Equity ETF earns a Below Average Process Pillar rating. 

The process benefits from low expenses across its parent firm's funds, whose fees rank in their respective category's middle quintile on average. The pattern of low expenses at the firm indicates that it is focused on delivering strong results for investors. However, the rating is weakened by the parent firm's five-year retention rate of 75%, which suggests it could do more to hold onto its portfolio managers. The parent firm's risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.1 stars, also holds the rating back. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy has more exposure to the Growth factor than the Small Blend Morningstar Category average. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Analyzing additional factors, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, the portfolio has tended to underweight yield, as shown in its lower exposure to companies that pay dividends or buy back shares than peers over these years. Its preference for stocks with lower yields may well lead to a growthier portfolio. However, growth stocks court additional risks if their forecasts do not come to fruition and are often more volatile than companies with stable dividends. In recent months, the strategy also had less Yield factor exposure than 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 and industrials relative to the category average by 4.4 and 3.1 percentage points, respectively. The sectors with low exposure compared to category peers are real estate and consumer defensive, with real estate underweighting the average portfolio by 3.2 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 99 holdings and is diversified among those holdings. In its most recent portfolio, 18.2% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category average's 23.9%.

Below Average

Process

Goldman Sachs Small Cap Core Equity ETF earns an Average People Pillar rating. Greg Tuorto, the longest-tenured manager on the strategy, provides strong guidance, offering 19 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.4 stars, demonstrating above-average risk-adjusted performance. Greg Tuorto has an experienced backdrop of support. The three listed managers boast 15 years of average 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.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

Goldman Sachs Asset Management heads into an uncertain direction on multiple fronts, underpinning its Average Parent rating.
GSAM has long struggled with personnel turnover, with a steady degree of analyst departures and additions coinciding with leadership reshufflings over the past few years that includes the September 2022 departure of equity head Katie Koch. Meanwhile, parent company Goldman Sachs elected to merge its asset management and wealth management units in October 2022, reversing a decision to split them in 2020, and assigned Marc Nachmann to lead the unit. Although he is a longtime Goldman veteran, most of his prior experience has been with the firm’s investment bank. Potentially complicating his remit is the firm’s December 2021 acquisition of NN IP, whose traditional and sustainable-investing branches could add capabilities but will take time to integrate. Bolstering the firm’s sustainability credentials could be especially pressing given the SEC’s November 2022 fining of GSAM for past failings in its ESG-related operations. 
GSAM has some strengths worth highlighting. Portfolio-manager ownership statistics across the firm’s U.S. lineup have improved dramatically since the firm instituted a deferred compensation program of fund shares in early 2020, and GSAM has compelling capabilities within its quantitative equity franchise.

Parent

Goldman Sachs Small Cap Core Equity ETF

The Goldman Sachs Group, Inc. engages in global investment banking, securities, and investment management, which provides financial services. It operates through the following business segments: Investment Banking, Global Markets, Asset Management, and Consumer & Wealth Management. The Investment Banking segment serves public and private sector clients around the world and provides financial advisory services, helping companies raise capital to strengthen and grow their businesses and provide financing to corporate clients. The Global Markets segment serves its clients who buy and sell financial products, funding and managing risk. The Asset Management segment provides investment services to help clients preserve and grow their financial assets. The Consumer & Wealth Management segment helps clients to achieve their individual financial goals by providing wealth advisory and banking services. The company was founded by Marcus Goldman in 1869 and is headquartered in New York, NY.

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