Point Bridge America First ETF retains its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High 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 volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like a favorable lineup success ratio, but is held back by an unstable portfolio manager lineup. This earns the firm an Average Parent Pillar 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. Point Bridge America First ETF earns a High Process Pillar rating. The most significant contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's five-year risk-adjusted success ratio of 100% also strengthens the process. 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. Their respectable success ratio suggests that the firm does well for investors and that this fund may benefit from that. Strong risk-adjusted performance also supports the process, as shown by the fund's five-year alpha calculated relative to the category index, which suggests the process was successful over that period.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the performance, before fees and expenses, of the Point Bridge America First Index.  Under normal circumstances, at least 80% of the fund’s net assets will be invested in the securities of U.S. companies. The index uses an objective, rules-based methodology to track the performance of U.S. companies whose employees and political action committees (“PACs”) are highly supportive of Republican candidates for election to the United States Congress, the Vice Presidency, and or the Presidency (“Candidates”) and party-affiliated federal committees or groups that are subject to federal campaign contribution limits. 

 The portfolio is overweight in industrials and basic materials relative to the category average by 11.0 and 4.7 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and technology, underweight the average by 11.3 and 8.4 percentage points of assets, respectively. The strategy owns 141 securities and is less top-heavy than peers. Specifically, 8.6% of the fund’s assets are concentrated within the top 10 fund holdings, compared to the category average's 27.4%. And finally, in terms of portfolio turnover, on a year-over-year basis, 36% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

Point Bridge Capital’s team receives a Below Average People Pillar rating. The team benefits from the strategy's fees, which rank in its category's second cheapest quintile. Fees reduce net returns, so the managers have a lower expense hurdle to overcome. However, the rating is weakened by the instability 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 managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns, also holds the team back.

Below Average

People

Point Bridge Capital has some investor-friendly attributes, but other attributes warrant caution, leading to an Average Parent Pillar rating.  The firm has seen high portfolio management turnover over the past five years, which detracts from the firm’s rating. A stable team tends to support positive results. Point Bridge Capital's longest-tenured managers do not possess comparable experience as teams at other firms, a cause for concern. Specifically, average tenure within the firm is five years. As such, there is less confidence in the group's ability to manage capital through a full market cycle effectively.

Average

Parent

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