PIMCO RAFI Dyn Mlt-Fctr Emrg Mkts Eq ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest 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 underweight position in quality exposure and an overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The team managing the passive strategy earns the strategy an Average People Pillar rating. The strategy's parent organization earns the firm an Above 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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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. PIMCO RAFI Dyn Mlt-Fctr Emrg Mkts Eq ETF earns a High Process Pillar rating. 

The main driver of 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. Impressive risk-adjusted performance also bolsters the process. This can be seen in the fund's five-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, supports the rating as well.

 This strategy skews toward smaller, deeper value companies than its average peer in the Diversified Emerging Mkts Morningstar Category. Analyzing additional factors, this strategy has consistently favored low-quality stocks 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 tended to overweight yield during recent years, shown by the portfolio's high exposure to dividends or buybacks. Higher-yield stocks can provide steady income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. Additionally, this strategy has demonstrated a preference for high-momentum stocks in these years. Momentum strategies wager that market outperformers will continue to outperform, and laggards will continue to lag. Higher exposure to the former could mean the managers are overweighting stocks on winning streaks. In this month, the strategy also had more exposure to the Momentum 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 energy relative to the category average by 5.2 and 4.9 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 4.2 and 4.2 percentage points of assets, respectively. The strategy owns 814 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 12.5% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category average's 25.3%. And finally, in terms of portfolio turnover, on a year-over-year basis, 54% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

PIMCO’s team earns An Average People Pillar rating. The most important factor influencing the rating is the strategy's fees, which rank in its category's cheapest fifth. Fees detract from net returns, so the team has a lower expense hurdle to overcome. The portfolio managers' outperformance at the funds they run, as measured by their combined three-year manager excess returns, also contributes to the rating. Lastly, the rating is limited by the experience of the management team, which averages seven years at this fund.

Average

People

Some concerns notwithstanding, Pimco's massive resources--both capital and human--and its laser ‎focus on excellence merit an Above Average Parent rating.‎
True, Pimco could be better on pricing. Shareholders, particularly in Europe, haven't enjoyed the ‎economies of scale that they could given Pimco's massive asset base. The firm, however, believes its ‎pricing is fair based on what it consistently delivers for investors, and it's hard to argue that's not the ‎case.‎
Pimco has generally enjoyed great success with its intense working culture, even if departures are a ‎byproduct of that intensity and can sometimes dim the near-term outlook on strategies. Yet, more ‎often than not, Pimco draws on its legion of skilled people and positions the next generation to ‎thrive.
CIO Dan Ivascyn and CEO Manny Roman ‎represent that next generation and have built on the organizational strengths they inherited. An experienced and critical-thinking investor, ‎Ivascyn has sought to curate an elite staff and capable investment culture since he assumed his ‎current role in 2014 and since Roman joined him in 2016. They have significantly grown the firm's pool ‎of investment professionals and supported them by spending massively on technology and ‎technologists to spur persistent outperformance while keeping risk in check. There may be a few others in Pimco's league, but very few.‎

Above Average

Parent

PIMCO RAFI Dynamic Multi-Factor Emerging Markets Equity ETF

MFEM tracks an index of emerging-market companies that are selected and weighted by a combination of fundamental and technical factors.

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Emerging markets continued to expand at a solid pace midway into the first quarter of 2024, supported by broad-based expansion across both manufacturing and service sectors.

Emerging Markets Growth Remains Solid Amid Intensifying Inflationary Pressures

Emerging Markets Funds are made up of funds that seek long-term capital appreciation. Nigeria and Emerging Markets Europe have been the two areas that have seen the highest year-to-date and May returns. With the U.S. looking to pause rate hikes, we may see inflows coming back to domestic funds.

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Emerging market stocks continued their year-end rally to start 2021 buoyed by a wider rollout of COVID-19 vaccines as well as Joe Biden's victory in the U.S. presidential election.

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Price swings have been dramatic. For example, we've seen 8 +/- 4% absolute moves in the MSCI Emerging Markets Index in the last two weeks of March.

News for PIMCO RAFI Dynamic Multi-Factor Emerging Markets Equity ETF ETF (MFEM)