The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  ClearBridge Sustainable Infras ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy earns 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 quality exposure and yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. 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. ClearBridge Sustainable Infras ETF earns a Below Average Process Pillar rating. 

The process is strengthened by its level of diversification across individual securities, with its top 10 holdings accounting for 39% of assets. However, the rating is limited by its parent firm's subpar risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.5 stars. 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 37% also detracts from 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.

 This strategy has more exposure to the Growth factor than the Infrastructure Morningstar Category average. But in terms of market capitalization, it is on par with peers. Analyzing additional factors, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, 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. The managers have also tended to underweight yield compared with peers during recent years. This is demonstrated by the portfolio's low exposure to dividends or buybacks. While companies with high yields provide consistent income payments, they may cut payouts if their earnings fall. Similarly, in recent months, the strategy also had less exposure to the Yield factor than peers. In addition, this strategy has exhibited a tilt toward liquid assets, evidenced by consistently holding companies with relatively higher trading volumes. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, however, the strategy had less Liquidity factor exposure 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 utilities and real estate relative to the category average by 16.8 and 5.7 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and energy, underweight the average by 8.5 and 7.4 percentage points of assets, respectively. The portfolio is composed of 34 holdings and is quite concentrated. In particular, 38.8% of the fund’s assets are housed within the top 10 holdings, compared to the category’s 28.7% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 6% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

ClearBridge Sustainable Infras ETF earns an Average People Pillar rating. Nick Langley, the longest-tenured manager on the strategy, provides strong guidance, offering 18 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 4.2 stars, indicating that their risk-adjusted returns surpassed the category average. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 15 years of 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

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Parent

Legg Mason Global Infrastructure ETF

INFR is an actively managed fund that invests in US infrastructure companies that meet certain sustainability criteria.

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