A strong management team and sound investment process underpin iShares U.S. Consumer Focused ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating.  Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy's parent organization earns the firm an Above 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

Amazon

Home Depot

Costco

Walmart

Lowe's

Chipotle

O'Reilly Automotive

Target

Ross Stores

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. iShares U.S. Consumer Focused ETF earns an Above Average Process Pillar rating. 

The most significant contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The firm's five-year retention rate of 92% also underpins the process. Lastly, the process is limited by its parent firm's risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.1 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy leans toward larger, more value-oriented companies than its average peer in the Consumer Cyclical Morningstar Category. Looking at additional factor exposure, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy has also tilted toward low-volatility stocks in recent years, meaning those that have a lower standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy has not maintained a defensive tilt, demonstrated by low exposure to the quality factor. This means the fund avoids holding firms that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. In recent months, the strategy also had less Quality 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 defensive by 18.0 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 consumer cyclical and industrials, underweight the average by 14.4 and 4.4 percentage points of assets, respectively. The portfolio is composed of 187 holdings and is relatively top-heavy. Of the strategy's assets, 56.5% are concentrated within the top 10 holdings, compared to the category’s 45.5% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 18% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

iShares U.S. Consumer Focused ETF earns an Above Average People Pillar rating. Jeff Shen, the longest-tenured manager on the strategy, boasts 20 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.6 stars, demonstrating above-average risk-adjusted performance. Jeff Shen has an experienced backdrop of support. The three listed managers boast 11 years of average listed portfolio management experience. As a team, they manage two investment vehicles together, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

 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.

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

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