Despite People Pillar weakness and an Average Process Pillar, Roundhill MEME ETF gets enough right to retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy gets an Average Process Pillar. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and an 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 team managing this passive strategy earns a Low People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like overall attractive fees, but is held back by a low success ratio across its lineup. This earns the firm an 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. Roundhill MEME ETF earns an Average Process Pillar rating. The most important driver of 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. Low expenses across its parent firm's funds, whose fees, on average, rank in the second-cheapest quintile of their respective category, also contribute to the process. The pattern of low fees at the firm suggests that it is focused on delivering strong results for investors. 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 relatively low success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the performance, before fees and expenses, of the Solactive Roundhill Meme Stock Index (the “Index”).  The index seeks to track the performance of “meme stocks.” Meme stocks are equity securities of companies that exhibit a combination of elevated social media activity and high short interest, both of which are indicators of market sentiment. Under normal circumstances, and at least 80% of the fund’s net assets will be invested in meme stocks. The fund generally will invest in all of the component securities of the index in approximately the same proportions as in the index. It is non-diversified. 

 The portfolio is overweight in consumer cyclical and communication services relative to the category average by 15.3 and 9.7 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and industrials, underweight the average by 14.9 and 9.1 percentage points of assets, respectively. The portfolio is composed of 27 holdings and is relatively top-heavy. Of the strategy's assets, 42.3% are concentrated within the top 10 holdings, as opposed to the category’s 25.8% average. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.

Average

Process

Roundhill’s team receives a Low People Pillar rating. The largest detractor from the rating is the experience of the management team, which averages four years at this fund. The combined average five-year excess return of each manager also holds the rating back. It shows that the funds they manage have underperformed their respective category's average return. The instability of talent across its parent firm further holds the rating back. The firm's asset-weighted manager tenure of 43 years suggests that it could do more to retain portfolio managers.

People

Roundhill's track record as a steward is mixed, leading to an Average Parent Pillar rating. One 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-cheapest quintile of similarly distributed strategies. Roundhill strategies have failed to have lengthy success. In particular, the firm's five-year risk-adjusted success ratio demonstrates that only 0% have both survived and beaten their respective category median on a risk-adjusted basis. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. With an average three-year Morningstar Rating of 1.7 stars, the risk-adjusted performance of Roundhill's open-end and exchange-traded funds falls short of competitors.

Parent

Roundhill Meme ETF

The Roundhill Meme ETF tracks an equal-weighted index of 25 US-listed stocks selected based on a high social media activity score and high short interest percentage.

MEME tracks an equal-weighted index of 25 US-listed stocks selected baesd on a high social media activity score and high short interest percentage.

The Roundhill MEME ETF MEME will liquidate next month, according to a statement released recently by the fund's sponsor.

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NEW YORK , April 14, 2023 /PRNewswire/ -- Roundhill Investments  has announced it will execute a reverse split of the issued and outstanding shares of the Roundhill Cannabis ETF (Cboe BZX: WEED) and the Roundhill MEME ETF (NYSE Arca: MEME). The total market value of the shares outstanding will not be affected because of this split, except with respect to the redemption of fractional shares, as outlined below.

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News for Roundhill Meme ETF ETF (MEME)