Decreased confidence in VanEck Intl Hi Yld Bd ETF's prospects relative to its Morningstar Category peers results in  a downgrade in this strategy's Morningstar Medalist Rating to Negative from Neutral. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in B rated bonds and an overweight in debt with over 30-year maturities compared with category peers. 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

VanEck Intl Hi Yld Bd ETF earns a Below Average Process Pillar rating. 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. The process is strengthened by the firm's five-year retention rate of 86% over the period. However, the rating is weakened by 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 inferior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.7 stars, also weakens the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

The investment strategy as stated in the fund's prospectus is: 

The investment seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the ICE BofAML Global ex-US Issuers High Yield Constrained Index.  The fund normally invests at least 80% of its total assets in securities that comprise the fund's benchmark index. The index is comprised of below investment grade bonds issued by corporations located throughout the world (which may include emerging market countries) excluding the United States denominated in Euros, U.S. dollars, and Canadian dollars or pound sterling and issued in the major domestic or Eurobond markets.  

 This strategy has a modest 5.1% 12-month yield, lower than its average peers' 6.1%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 7.2%. Typically, a lower yield comes with the benefit of less credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated B. In terms of long-term interest-rate risk, this strategy is on par with peers. The longer a strategy's duration, the more sensitive it is to shifts in interest rates. This fund, with a 3.2-year duration, is expected to gain 3.2% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

Below Average

Process

VanEck’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. The fund takes a solo manager approach, with Francis Rodilosso as the only listed manager at the helm, who brings 20 years of portfolio management experience to the table. They manage a total of 11 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. With only one manager listed on the strategy, the passive strategy is vulnerable to key-person risk.However, they have built history managing the strategy, it has not changed hands within the last five years. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

VanEck’s ownership structure and specialization make it unique among industry peers. The firm’s founding family and namesake still have control, and its product lineup still reflects its legacy as a specialist in niche market segments. VanEck earns an Average Parent Pillar rating. 

Founded by John van Eck in 1955, the firm staked its claim in the industry by capitalizing on burgeoning markets. Starting with the opening of Western Europe to U.S.-based investors in the wake of the Marshall Plan, VanEck’s largest and most successful products provide exposure to areas of the market that are off the beaten path, such as hard assets, emerging-markets debt, and below-investment-grade-rated corporate debt.

Through its history, VanEck has taken an opportunistic approach to product development. For instance, since 2018, VanEck has launched strategies that provide exposures ranging from international REITs to companies involved in video game development. Regardless of where their reach takes them, however, VanEck builds a case that the strategy will be relevant over the long term and that its risks must be easy to understand. However, not all its products catch on, and the firm has shuttered several offerings in the last decade. 

VanEck remains a privately held firm, wholly owned by CEO Jan van Eck and his family. Although this enables the firm to focus on the long term and the firm offers some employees participation in profits, the firm hasn’t used equity as a recruiting and retention tool and introduces some key-person risk in the executive suite.

Parent

VanEck International High Yield Bond ETF 

IHY tracks a market-value-weighted index of international corporate bonds rated below investment grade and denominated in developed-market currencies.

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