A strong management team and sound investment process underpin Main International ETF's Morningstar Medalist Rating of Bronze. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-highest quintile among peers.  

 The strategy's managers invest alongside shareholders, which helps it earn an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating.  Momentum is the premise that stocks that have recently outperformed will continue to do so. With low momentum exposure, the portfolio is holding stocks that managers believe to be undervalued. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization is industry standard, albeit with some strong attributes like modest portfolio manager turnover, but is held back by a low success ratio across its lineup. This earns the firm an Average Parent Pillar rating.

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. Main International ETF earns an Above Average Process Pillar rating. 

The main driver of the rating is the parent firm's five-year risk-adjusted success ratio of 50%. 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 firm's five-year retention rate of 100% also underpins the process. 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, more undervalued companies compared with its average peer in the Foreign Large Blend Morningstar Category. Analyzing additional factors, this strategy has consistently had low exposure to momentum stocks in the past few years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. In the latest month, the strategy was also less exposed to the Momentum factor compared with Morningstar Category peers. 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. This contributes to a higher-risk, higher-reward approach. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. In this month, however, the strategy had more exposure to the Quality factor 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 technology by 4.9 percentage points in terms of assets compared with the category average, and its real estate allocation is similar to the category. The sectors with low exposure compared to category peers are healthcare and consumer defensive, with healthcare underweighting the average portfolio by 6.0 percentage points of assets and consumer defensive similar to the average. The portfolio is composed of 19 holdings and is relatively concentrated. In particular, 71.1% of the fund’s assets are housed within the top 10 holdings, compared with the typical peer's 15.4%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 33% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Main International ETF earns an Above Average People Pillar rating. The main contributor to the rating is the firm's five-year retention rate of 100%. The size of the portfolio management team also influences the rating. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the rating is limited by the parent firm's five-year success ratio of 0%. 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.


Kim D. Arthur’s veteran status, with 21 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.5 stars, indicating that their risk-adjusted returns have underperformed the category average. The highest personal investment in the fund by any of its managers is between $500,000 and $1 million. That's on the low side--it would need to be more than $1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors.

People

Main Management has some investor-friendly attributes, but other attributes warrant caution, leading to an Average Parent Pillar rating. A source of strength is that the firm has been skilled at holding onto portfolio management talent, providing continuity for strategies, as shown by low turnover over the past five years compared with others in the industry. The firm’s lineup has demonstrated industry-average durability. Its five-year risk-adjusted success ratio is 50%, meaning that 50% of strategies have both survived and beaten their respective category median on a risk-adjusted basis. A firm's success ratio indicates relative performance and provides insight into a firm’s discipline around investment strategy and product development. Main Management open-end and exchange-traded products are priced, on average, among the second most-expensive quintile of similarly distributed strategies. This higher expense profile of its funds creates a larger performance hurdle and contributes negatively to Main Management's rating.

Average

Parent

Main International ETF

INTL is a fund-of-funds containing non-US equity exposure. The fund is actively managed, seeking long term capital appreciation through equity exposure and covered option writing strategies.

The Main International ETF has performed well since inception, outperforming a passive international index ETF in 2023. The fund's investment process and strategy are not well-documented, making it difficult to determine if its outperformance is sustainable. INTL is currently overweight Japan and India, while underweight China and the U.K. These active allocations have added value over the past year.

INTL: Strong Performance Out Of The Gate

The week after Thanksgiving was busy, yet only saw six launches.

News for Main International ETF ETF (INTL)