Leatherback Long/Short Alt Yld ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy benefits from a notable effort from managers to align personal interests with shareholders by investing alongside them. This helps drive the team's Average People Pillar rating. The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable underweight position in quality exposure and volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy's parent organization is industry standard, albeit with some strong attributes like a competitive lineup success ratio and a strong risk-adjusted track record. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Fidelity National Information

Exxon Mobil

Bunge

Visa

Zimmer Biomet Hlds

Old Republic International

AbbVie

Intercontinental Exchange

Packaging Corp of America

Comcast

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. Leatherback Long/Short Alt Yld ETF earns an Average Process Pillar rating. 

The primary contributor to the rating is the firm's five-year retention rate of 100% over the period. The parent firm's superior risk-adjusted performance, as shown by its average overall Morningstar Rating of 4.0 stars, also strengthens the process. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy leans toward smaller, more undervalued companies compared with its average peer in the Long-Short Equity Morningstar Category. Analyzing additional factors, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. In this month, the strategy also had more exposure to the Yield 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 basic materials and healthcare relative to the category average by 6.5 and 6.4 percentage points, respectively. The sectors with low exposure compared to category peers are technology and communication services, underweight the average by 18.3 and 2.7 percentage points of assets, respectively. The portfolio is composed of 35 holdings and is relatively top-heavy. Of the strategy's assets, 47.9% are concentrated within the top 10 holdings, as opposed to the category’s 11.9% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 44% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Leatherback Long/Short Alt Yld ETF earns an Average People Pillar rating. The most important factor affecting the rating is the firm's five-year retention rate of 100%. A low cost, with fees that rank in its category's least expensive fifth, also supports the rating. A higher expense ratio reduces net returns, so low costs give this team an advantage. Lastly, the rating is limited by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns.


Michael J. Venuto, the longest-tenured manager on the strategy, provides strong guidance, offering 11 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.5 stars, indicating that their risk-adjusted returns have underperformed the category average. Michael J. Venuto has an experienced backdrop of support. The three listed managers boast 11 years of average listed portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between $100,000 and $500,000. An investment of more than $1 million would be ideal to align managers' interests with those of the fund's investors.

People

Leatherback's track record as a steward is mixed, leading to an Average Parent Pillar rating.  Leatherback has served investors well through its very competitive risk-adjusted performance, with an average overall Morningstar Rating of 4.0 stars across its open-end and exchange-traded funds. A notable weakness of Leatherback 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 three years of average tenure across their management team, there is cause for concern.

Parent

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