Weakness in Global X Guru™ ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy earns a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The team managing this passive strategy earns a Low People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

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 benchmark on a risk-adjusted basis over the long term. Global X Guru™ ETF earns a Low Process Pillar rating. The most substantial detractor from the rating is the fund's unimpressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's subpar risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.1 stars, also holds the rating back. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis. The parent firm's five-year risk-adjusted success ratio of 28% further limits the process. 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 subpar success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, and of the Solactive Guru Index ("underlying index").  The fund invests at least 80% of its total assets in the securities of the underlying index and in American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the underlying index. The underlying index is comprised of the top U.S. listed equity positions reported on Form 13F by a select group of entities characterized as hedge funds. 

 The portfolio is overweight in basic materials and energy relative to the category average by 5.7 and 5.7 percentage points, respectively. The sectors with low exposure compared to category peers are technology and communication services, underweight the average by 19.4 and 6.7 percentage points of assets, respectively. The portfolio is composed of 62 holdings and is less top-heavy than peers. Specifically, 17.7% of the fund’s assets are concentrated within the top 10 fund holdings, compared to the typical peer's 54.8%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 101% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Process

Global X’s team earns a Low People Pillar rating. The largest detractor from the rating is the parent firm's five-year success ratio of 30%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 67% also limits the team. The experience of the management team, which averages four years at this fund, limits the rating as well.

People

Mirae Asset Global Investments is a Korean asset manager and a key player in the Asian financial market. It is a wholly owned subsidiary of Mirae Asset Financial Group, founded by Hyeon Joo Park. Park’s leadership and entrepreneurial spirit have been the driving force behind the global rise of Mirae, and he holds a majority stake in the business. 
Mirae Asset has grown significantly over the years (USD 198 billion as of December 2022) across a diversified platform, of which about 60% of assets are managed in South Korea. We believe that Mirae’s core mutual fund business in the Asia-Pac region is relatively strong. It has a collaborative structure, a strong and large investment team, low manager turnover, competitive fees, and a disciplined approach to product-development pointing toward better stewardship practices relative to peers in these markets. However, this is in stark contrast to its exchange-traded fund business, which accounts for 41% of the total assets. 
The firm’s ETF lineup focuses largely on high-risk thematic strategies that seem gimmicky, emphasizing short-term asset-gathering. The firm appears to leverage trending topics such as robotics and artificial intelligence, virtual reality and gaming, and cloud computing. There’s a notable concern regarding the potential liquidation of these funds since they seem to be designed around investment fads. Furthermore, these products are often expensive, especially compared with broadly diversified index funds and ETFs. Unsurprisingly, Mirae's reflexive product-development strategy has led to an increase in fund closures.
Our experience engaging with the MAGI team to gather critical information for the parent assessment has not been as positive. It hasn’t been as transparent in its disclosures, and unlike its peers, its responsiveness has been inadequate. We prefer firms with a more transparent corporate culture. Overall, these actions hold us back, and the firm retains its Parent Pillar rating of Average.

Average

Parent

Global X Guru Index ETF

GURU tracks an equal-weighted index that attempts to mimic concentrated equity positions taken by large hedge funds, as reported in public filings.

The Global X Guru Index ETF, which tracks the top holdings of select hedge funds, has underperformed against a passive market index fund due to its flawed strategy. The GURU ETF uses lagged data from 13F filings and focuses only on each hedge fund's largest holding, which may not necessarily be its best-performing one. The GURU ETF's strategy assumes that hedge funds are designed to maximize absolute returns, which is not always the case.

GURU: Tracking Hedge Fund Gurus To Underperformance

GURU is a passively managed, U.S.-focused ETF offering exposure to hedge fund darlings weighted equally. The GURU portfolio has seen a few meaningful changes since April 6. The equity basket has become leaner, with minor improvements on EPS growth and quality fronts. Its performance is mostly a disappointment. This year, it has been recovering at a glacial pace, underperforming IVV again.

GURU: Equally Weighted Hedge Fund Darlings Underperform

GURU is a passively-managed fund offering exposure to a basket of hedge-fund darlings picked from the 13F filings. Despite having a robust start, GURU has underperformed both IVV and QQQ since July 2012, with 2022 being especially sluggish.

GURU: Promising Strategy Delivers Uninspiring Returns

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