The combination of a middling Process Pillar rating and a Low People Pillar rating limit  Roundhill S&P Dividend Monarchs ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The team managing the passive strategy earns a Low People Pillar. The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight liquidity exposure and has a significant underweight in 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 is industry standard, albeit with some strong attributes like overall reasonable fees, but is held back by a low success ratio across its lineup. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Black Hills

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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. Roundhill S&P Dividend Monarchs ETF earns an Average Process Pillar rating. 

The most notable 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. A low expense ratio, with costs ranking in its category's cheapest 20%, also bolsters the process. Higher fees detract from net returns, which gives this fund an advantage over those with higher costs. Lastly, 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.

 This strategy tends to hold smaller, higher-growth companies than its average peer in the Large Value Morningstar Category. Analyzing additional factors, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. In recent months, the strategy also had less Quality factor exposure than 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 defensive and consumer cyclical relative to the category average by 23.0 and 5.8 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and technology, underweight the average by 17.4 and 12.5 percentage points of assets, respectively. The strategy owns 42 securities and is relatively concentrated. Specifically, 39.7% of the fund’s assets are housed within the top 10 holdings, compared with the typical peer's 27.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 0% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Roundhill’s team receives a Low People Pillar rating. The main detractor from the rating is the experience of the management team, which averages four years at this fund. Turnover at its parent firm also holds the team back. The firm's asset-weighted manager tenure of two years suggests it could do more to retain portfolio managers. The parent firm's five-year success ratio of 0% further holds the team back. 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 relatively low success ratio suggests that the firm could do better across its fund lineup.

People

Roundhill is an industry-standard asset manager, resulting in an Average Parent Pillar rating. An area of strength is the firm’s favorable fees for open-end and exchange-traded funds, demonstrating a firm-wide commitment to minimizing costs and maximizing investors’ returns. Fees for funds are, on average, within the second-lowest quintile of similarly distributed strategies. The firm has not had a durable product lineup. Specifically, its three-year success ratio demonstrates that only 0% of products both survived and beat their respective category median. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. With an average five-year Morningstar Rating of 1.0 stars, the risk-adjusted performance of Roundhill's open-end and exchange-traded funds falls short of competitors.

Parent

Roundhill S&P Dividend Monarchs ETF

KNGS is actively managed to select globally, a narrow group of companies believed to provide long-term capital growth.

KNGS tracks a yield-weighted index of dividend-paying companies from the S&P Composite 1500 Index that have increased dividends for at least 50 consecutive years.

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