A strong management team and sound investment process underpin IQ Candriam U.S. Mid Cap Equity ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The team managing the passive strategy drives the strategy's Above Average People Pillar rating, following a recent upgrade from Average. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in liquidity exposure and momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Williams-Sonoma

GoDaddy

Reliance Steel & Aluminum

EMCOR Group

Nutanix

Packaging Corp of America

Masco

Owens Corning

Reinsurance Group of America

Neurocrine Biosciences

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. IQ Candriam U.S. Mid Cap Equity ETF earns an Above Average Process Pillar rating. The largest contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 87% also buttresses the rating. Lastly, the process is limited by its parent firm's disappointing risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.8 stars. 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 investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the IQ Candriam U.S. Mid Cap Equity Index.  The underlying index is designed to deliver exposure to equity securities of companies meeting environmental, social and corporate governance (ESG) criteria developed by Candriam and weighted using a market-capitalization weighting methodology. Under normal circumstances, and at least 80% of the value of its assets (net assets plus the amount of any borrowings for investment purposes) in U.S. equity securities of mid-capitalization companies. 

 The portfolio is overweight in healthcare and consumer cyclical relative to the category average by 4.3 and 3.7 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and energy, with financial services underweighting the average portfolio by 5.0 percentage points of assets and energy similar to the average. The portfolio is composed of 206 holdings and is diversified among those holdings. In its most recent portfolio, 9.1% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category’s 15.4% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 13% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

New York Life’s team receives an Above Average People Pillar rating. The main contributor to the rating is the firm's five-year retention rate of 87%. A low cost, with fees that rank in its category's cheapest 20%, also improves the rating. Fees reduce net returns, so the team has a lower expense hurdle to overcome. Lastly, the rating is limited by the parent firm's five-year success ratio of 44%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

People

New York Life Investments' collection of autonomous investment boutiques will have a new leader in May 2023, and it will take time to assess his impact. The firm keeps its Average Parent rating.
New York Life, the insurance giant that owns NYL Investments, tapped Naïm Abou-Jaoudé to be the asset manager's CEO after the previous CEO departed. Abou-Jaoudé inherits a firm that has grown by building internally and through acquisition. The firm offers mandates in partnership with 13 different asset managers--eight of which are wholly or partially owned affiliates – through several global outlets. Most U.S. funds fall under the established MainStay brand, whereas IndexIQ oversees a growing lineup of ETFs managed both internally and by other affiliates. Candriam, at which Abou-Jaoudé has been CEO even prior to its 2014 acquisition by NYL Investments, takes the lead in Europe through its own offerings and through those subadvised by other boutiques.
Plenty of these capabilities are compelling, with Candriam and fellow affiliates MacKay Shields and Ausbil sporting standout teams in several wheelhouses. Yet many of the boutiques have also struggled with managing bloated lineups or with improving lagging teams. NYL Investments hasn't shied from changing subadvisors or merging platforms and doesn't have a spotless record of managing capacity or of avoiding trendy offerings.

Average

Parent

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IndexIQ, a leading provider of innovative multi-asset investment solutions, today announced the launch of two new additions to the firm's fast-growing lineup of ESG investment solutions: the IQ MacKay ESG High Income ETF (IQHI) and the IQ Candriam ESG U.S. Mid Cap Equity ETF (IQSM).

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