Preferred-Plus ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The portfolio management team has made an effort to align personal interests with shareholders by investing alongside them. This positively supports the strategy's Average People Pillar rating. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable overweight position in corporate bonds and B rated bonds compared with category peers. The strategy's parent organization still has a way to go to reach the industry standard, evidenced by a bench of relatively inexperienced portfolio managers and an unsuccessful risk-adjusted track record. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. Preferred-Plus ETF earns an Average Process Pillar rating.    The leading factor in the rating is the firm's five-year retention rate of 100% over the period. The process is limited by the parent firm's five-year risk-adjusted success ratio of 0%. 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 modest success ratio suggests that the firm could do better across its fund lineup.

 Compared with other funds in the Preferred Stock Morningstar Category, this fund consistently took on similar credit risk over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the category average, the managers have been significantly overweight corporate bonds in recent years. In the latest month, the strategy has relatively overweighted corporate debt compared with its peers as well. Additionally, there's been a notable overallocation to B rated bonds over the past few years. Compared with category peers, the strategy had more exposure to B rated bonds in the most recent month. Finally, during the past few years, the fund leaned meaningfully away from debt with 10- to 15-year maturities. In recent months, the strategy also had less exposure to debt with 10- to 15-year maturities compared to its peers.

 This strategy has a modest 5.4% 12-month yield, lower than its average peers' 5.9%. While a lower yield may deliver less income, it also tends to indicate lower 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 BB.

Average

Process

Preferred-Plus ETF earns an Average People Pillar rating. The main contributor to the rating is its parent firm's five-year success ratio of 100%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The firm's five-year retention rate of 100% also influences the rating. Lastly, the rating is limited by the instability of its management team. The fund last saw a manager change one month ago, which suggests that it could do more to retain its portfolio managers.


The strategy is backed by JR Humphreys, the longest-tenured manager, who has been a listed portfolio manager for eight years. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, demonstrating average risk-adjusted performance. The team is small but adequately equipped, with only one other supporting manager. Together, the two listed managers have eight years of average listed portfolio management experience. The team's personal investments in the fund are insignificant, with the maximum investment by either manager being between $50,000 and $100,000. That amount is too small to help align managers' interests with the fund's investors.

People

Innovative Portfolios fails to meet industry-standard stewardship qualities, culminating in a Below Average Parent Pillar rating. Longest-tenured managers have five years of average asset-weighted tenure, which is slim compared with peer firms. In isolation, this doesn't bode well as the current managers have limited experience running strategies. The Innovative Portfolios roster of open-end and exchange-traded funds has had below-average risk-adjusted performance, as evidenced by its average overall Morningstar Rating of 2.0 stars. Innovative Portfolios has exhibited a reliable and stable portfolio management culture over the past five years, as evidenced by lower-than-average turnover, strengthening the assessment of the firm's stewardship.

Below Average

Parent

Preferred-Plus ETF

IPPP provides exposure by holding preferred securities issued by US and non-US companies, with a 10% exposure to the S&P 500 ETF using a credit spread options strategy.

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News for Preferred-Plus ETF ETF (IPPP)