Weakness in Alpha Architect Intl Quant Val ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy receives a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The strategy's portfolio management team has comparable experience to other strategies in the industry. However, due to other weaknesses, the strategy earns a Below Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like overall affordable fees, but is held back by an unstable portfolio manager 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 benchmark on a risk-adjusted basis over the long term. Alpha Architect Intl Quant Val ETF earns a Below Average Process Pillar rating. 

The process is strengthened by the size of its portfolio management team. With four portfolio managers at the helm, the fund is reasonably well-resourced. However, the rating is held back by the fund's unremarkable 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 five-year risk-adjusted success ratio of 17% also holds the process back. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

 This strategy targets smaller plays than its peers’ average in the Foreign Large Value Morningstar Category. But in terms of investment style, it is on par with peers. Examining additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity, during these years. Such holdings could cause it to trail peers during economic booms, but help it better withstand busts. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility factor 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 consumer cyclical and industrials relative to the category average by 19.7 and 8.1 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and technology, underweight the average by 22.3 and 5.6 percentage points of assets, respectively. The portfolio is composed of 56 holdings and is relatively top-heavy. Of the strategy's assets, 22.7% are concentrated within the top 10 holdings, as opposed to the category’s 13.9% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 74% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Alpha Architect Intl Quant Val ETF earns a Below Average People Pillar rating. The team is supported by the strategy's costs, which rank in its category's least expensive fifth. Fees reduce net returns, so the managers have a lower expense hurdle to overcome. However, the rating is weakened by the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of five years suggests it could do more to retain portfolio managers. The parent firm's five-year success ratio of 33% also limits the team. 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 subpar success ratio suggests that the firm could do better across its fund lineup.


The team is backed by Wesley R. Gray, the longest-tenured manager on the strategy, who provides 15 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.2 stars, reflecting below-average risk-adjusted performance compared to category peers. Wesley R. Gray has an adequate backdrop of support, drawing on three additional listed managers, averaging seven years of listed portfolio management experience.

People

In a competitive industry, Alpha Architect doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One notable advantage of Alpha Architect is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the lowest quintile of category peers. A detractor from the firm's rating is its lower-than-average portfolio management retention over the past five years, as elevated turnover bears watching. With an average five-year Morningstar Rating of 2.0 stars, the risk-adjusted performance of Alpha Architect's open-end and exchange-traded funds falls short of competitors.

Average

Parent

Alpha Architect International Quantitative Value ETF

IVAL is an active, equal-weighted portfolio of developed-market ex-US value stocks, screened for forensic accounting and earnings quality.

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Alpha Architect is switching its ETFs over to active management. Effective Monday, the Alpha Architect International Quantitative Momentum ETF (IMOM), the Alpha Architect International Quantitative Value ETF (IVAL), the Alpha Architect U.S. Quantitative Momentum ETF (QMOM), the Alpha Architect U.S. Quantitative Value ETF (QVAL), and the Alpha Architect Value Momentum Trend ETF (VMOT) have changed from being passively managed (tracking [.

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