The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Martin Currie Sustainable Intl Eq ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The management team doesn't personally invest much alongside shareholders. This is a large contributor to the strategy's Below Average People Pillar. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and has an overweight in volatility exposure compared with category peers. A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

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Carlisle Companies

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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. Martin Currie Sustainable Intl Eq ETF earns an Average Process Pillar rating. 

The most important driver of the rating is the stability of the management team. Specifically, the fund has not seen a manager change in the last eight years. The process is limited by its parent firm's subpar risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.5 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy skews toward smaller, higher-growth companies than its average peer in the Foreign Large Growth Morningstar Category. Looking at additional factor exposure, this strategy has consistently had a defensive tilt owing to its exposure to high-quality stocks over the past few years. Such holdings could cause it to trail peers during economic booms, but help it better withstand busts. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. Such exposure tends to pay off when markets are hot and to be costly when they are not. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, the portfolio has tended to underweight yield, as shown in its lower exposure to companies that pay dividends or buy back shares than peers over these years. Returning capital to shareholders often is not the highest priority of such businesses. The shares of such companies can deliver strong returns if they fulfill their growth projections, but they also carry more risk. In recent months, the strategy also had less Yield 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 technology and healthcare relative to the category average by 9.8 and 8.1 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and communication services, underweight the average by 12.0 and 3.6 percentage points of assets, respectively. The strategy owns 24 securities and is relatively concentrated. Specifically, 58.4% of the fund’s assets are housed within the top 10 holdings, compared with the category’s 17.8% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 26% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Martin Currie Sustainable Intl Eq ETF earns a Below Average People Pillar rating. The team is bolstered by the stability of the management team. Specifically, the fund has not seen a manager change in the last eight years. However, the rating is weakened by the parent firm's five-year success ratio of 37%. 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 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.


Zehrid Osmani’s veteran status, with 14 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 1.7 stars, reflecting below-average risk-adjusted performance versus category peers. Zehrid Osmani has an experienced listed co-manager. Together, they average 11 years of listed portfolio management experience.

Below Average

People

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Parent

Martin Currie Sustainable International Equity ETF

MCSE actively invests in a concentrated equity portfolio of foreign companies of any market capitalization. The fund selects equities based on ESG criteria and factors related to long-term potential.

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