Weakness in Knowledge Leaders Developed World ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The team managing the strategy earns a Low People Pillar. The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable 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 that are consistently profitable, growing, and have solid balance sheets. The strategy's parent organization still has a way to go to reach the industry standard, evidenced by a bench of unseasoned portfolio managers and high portfolio manager turnover. As a result, the firm obtains a Below 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. Knowledge Leaders Developed World ETF earns a Below Average Process Pillar rating. 

The process benefits from the experience of the management team, which averages 29 years at this fund. However, the rating is held back by the fund's mediocre 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 retention rate of 25% also limits the process.

 This strategy tends to hold smaller, higher-growth companies than its average peer in the Global Large-Stock Blend Morningstar Category. Examining additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. 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. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. 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. Such exposure tends to pay off when markets are hot and to be costly when they are not. 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 industrials and basic materials relative to the category average by 10.6 and 4.1 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and energy, underweight the average by 12.3 and 3.9 percentage points of assets, respectively. The strategy owns 104 securities and its assets are more dispersed than peers in the category. In particular, 15.7% of the fund’s assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 25.2%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 96% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Knowledge Leaders Developed World ETF earns a Low People Pillar rating. The most significant detractor from the rating is the parent firm's five-year retention rate of 25%, which suggests it could do more to hold onto its portfolio managers. The parent firm's five-year success ratio of 0% also limits the team. 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. The instability of its management team detracts from the rating further. Specifically, the fund last had a manager change two years ago.

People

In an increasingly competitive industry, Knowledge Leaders Capital falls behind on a number of key metrics, resulting in a Below Average Parent Pillar rating. A notable weakness of Knowledge Leaders Capital is the inexperience of its longest-tenured managers compared with other asset managers. Managing capital through a full market cycle is a challenging prospect for seasoned managers, but with only about four years of average asset-weighted tenure, there's cause for concern. Manager turnover at Knowledge Leaders Capital over the past five years has been higher than at peer asset management firms, a possible signal that company culture is a bit unstable. Knowledge Leaders Capital stands out in its commitment to investor values by offering its open-end and exchange-traded product lineup at a minimal cost. On average, fund fees at the firm are in the second-cheapest quintile compared with category peers.

Parent

Knowledge Leaders Developed World ETF

KLDW is actively managed to invest in highly innovative companies from developed markets.

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News for Knowledge Leaders Developed World ETF ETF (KLDW)