A strong management team and sound investment process underpin iShares US Basic Materials ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The equity team managing the passive strategy drives the strategy's Above Average People Pillar rating. 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 an underweight position in volatility exposure and momentum exposure compared with category peers. Low volatility exposure is attributed to stocks with a lower standard deviation of returns. 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 is part of a first-rate parent that has overall reasonable fees and a high success ratio across its product shelf. These attributes support its Above Average Parent Pillar rating.

Analyst Rating

Linde

Air Products and Chemicals

Freeport-McMoRan

Ecolab

Nucor

Dow Inc

Newmont Mining

Fastenal

LyondellBasell Industries

Albemarle

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. iShares US Basic Materials ETF earns an Above Average Process Pillar rating. The most significant contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Respectable risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. Lastly, the process is limited by its parent firm's risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.1 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 to track the investment results of the Russell 1000 Basic Materials RIC 22.5/45 Capped Index composed of U.S. equities in the basic materials sector.  The fund generally will invest at least 80% of its assets in the component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the component securities of its underlying index. The underlying index measures the performance of the basic materials sector of the U.S. equity market. The fund is non-diversified. 

 The portfolio is overweight in basic materials by 40.9 percentage points in terms of assets compared with the category average, and its consumer cyclical allocation is similar to the category. The sectors with low exposure compared to category peers are energy and real estate, underweight the average by 22.5 and 4.4 percentage points of assets, respectively. The portfolio is positioned across 44 holdings and is relatively top-heavy. Of the strategy's assets, 63.7% are concentrated within the top 10 holdings, as opposed to the typical peer's 24.8%. And finally, in terms of portfolio turnover, this portfolio's holdings turn over more often than comparable products in its peer group, possibly resulting in higher costs for investors and a drag on performance.

Above Average

Process

iShares US Basic Materials ETF benefits considerably from its equity team, earning it an Above Average People Pillar rating. There are three managers listed on the fund: Paul Whitehead, Jennifer Hsui, Greg Savage. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of 258 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. The team has undergone a bout of turnover recently, with Amy Whitelaw leaving within the last five months. Even though it is a passive fund, high turnover can still hinder the effectiveness of the investment process. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares U.S. Basic Materials ETF

IYM tracks a broad, market-cap-weighted index of US basic materials companies that includes raw materials such as metals, chemicals and forestry products.

Launched on 06/12/2000, the iShares U.S. Basic Materials ETF (IYM) is a passively managed exchange traded fund designed to provide a broad exposure to the Materials - Broad segment of the equity market.

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