Gotham Enhanced 500 ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The management team invests alongside the strategy's shareholders, which helps it earn an Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like a successful risk-adjusted track record and a strong success ratio across its product lineup. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Microsoft

Apple

Amazon

Alphabet

NVIDIA

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Home Depot

JPMorgan Chase & Co

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. Gotham Enhanced 500 ETF earns an Above Average Process Pillar rating. 

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 82%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The firm's five-year retention rate of 100% also underpins the rating. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy skews toward smaller, deeper value companies compared with its average peer in the Large Blend Morningstar Category. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last 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 suffer from 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 also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Higher-yield stocks can provide dependable income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. 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 by 4.2 percentage points in terms of assets compared with the category average, and its technology allocation is similar to the category. The sectors with low exposure compared to category peers are healthcare and financial services, with healthcare underweighting the average portfolio by 3.8 percentage points of assets and financial services similar to the average. The strategy owns 503 securities and is diversified among those holdings. In its most recent portfolio, 36.2% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category average's 48.8%.

Above Average

Process

Gotham Enhanced 500 ETF earns an Average People Pillar rating. The primary contributor to the rating is the firm's five-year retention rate of 100%. The rating is also helped because a manager has at least $1 million invested in the strategy. Lastly, the rating is limited by the combined average five-year excess return of each manager, which suggests that the funds they manage have fallen short of their respective category average.


The team is backed by Joel Greenblatt, the longest-tenured manager on the strategy, who brings 15 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.9 stars, indicating that their risk-adjusted returns surpassed the category average. The team boasts an experienced corps of listed portfolio managers, with three others supporting Joel Greenblatt. Together, they average 13 years of listed portfolio management experience.

Average

People

In a competitive industry, Gotham doesn't differentiate itself enough, leading to an Average Parent Pillar rating. However, an area of strength for the firm is that they've delivered strong risk-adjusted returns for shareholders, with an average overall Morningstar Rating of 3.8 stars across its open-end and exchange-traded products. The metric measures the risk-adjusted performance of an asset manager's currently live funds. The product lineup at Gotham has exhibited exemplary durability compared with peer asset managers when looked at over the past five years. Notably, its five-year risk-adjusted success ratio stands at 82%, meaning that 82% of its products have both survived and beaten their respective category median on a risk-adjusted basis. Average tenure of eight years among the longest-tenured managers at Gotham is on par with peer firms. In isolation, seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions.

Parent

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