Ballast Small/Mid Cap ETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest 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 yield exposure and volatility exposure compared with category peers. High yield exposure is attributed to holding more stocks with high dividend or buyback yields. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's industry-standard management team still needs to prove it has a competitive advantage and earns an Average People Pillar rating. To be considered a quality steward, this strategy's parent organization needs to improve factors like a lack of inside investments from portfolio managers and a bench of limited-tenure portfolio managers. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Federal Agricultural

Cavco Industries

MGIC Investment

PHINIA Inc

Teradata

CONSOL Energy

Eagle Materials

Cass Information Systems

GEO Group

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. Ballast Small/Mid Cap ETF earns an Average Process Pillar rating. 

The most significant contributor to the rating is the firm's five-year retention rate of 100% over the period. The parent firm's excellent risk-adjusted performance, as shown by its average overall Morningstar Rating of 4.0 stars, also contributes to 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 skews toward smaller, deeper value companies than its average peer in the Small Blend Morningstar Category. Examining additional factor exposure, this strategy has continually had more high-yield exposure than the Morningstar Category average during recent years, with the portfolio holding more stocks with high dividend or buyback yields. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in 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, however, the strategy had less Volatility factor exposure in the latest month. Additionally, this strategy has tilted toward illiquid stocks during these years, evidenced by holding companies with relatively lower trading volumes than peers. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In recent months, the strategy also had less Liquidity 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 energy and basic materials relative to the category average by 10.0 and 9.9 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and financial services, underweight the average by 7.8 and 5.3 percentage points of assets, respectively. The strategy owns 51 securities and is quite concentrated. Specifically, 34.2% of the portfolio's assets are housed within the top 10 holdings, versus the typical peer's 23.9%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 25% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Ballast Small/Mid Cap ETF earns an Average People Pillar rating. The most important driver of the rating is the combined average five-year excess return of each manager, which shows that the funds they manage have outperformed an average manager. The firm's five-year retention rate of 100% also bolsters the rating. Lastly, the rating is limited because none of the managers have over $1 million invested in the fund, which would indicate confidence in the strategy.

People

Ballast lags peer asset managers in a number of stewardship qualities, resulting in a Below Average Parent Pillar rating. Ballast fails to live up to one of the hallmarks of stewardship, manager investment, to help align portfolio manager and shareholder interests. None of the firm’s assets are covered by an invested manager. With an average asset-weighted tenure of six years among the longest-tenured managers at Ballast, the firm is on par with peers. Seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions. Turnover among Ballast portfolio management ranks has been low compared to other firms in the past five years. This stability on the personnel front boosts confidence in its staying power.

Below Average

Parent

Ballast Small/Mid Cap ETF

MGMT is an actively-managed fund that aims for positive risk-adjusted returns.

Avantis U.S. Small Cap Value ETF

iShares Russell 2000 ETF

Small-capitalization stocks and related exchange traded funds are experiencing a great run, one that may still have legs. Among the best performing small cap ETFs of 2021, the Ballast Small/Midcap ETF (NYSE: MGMT) has increased 33.5% and the Avantis U.S. Small Cap Value ETF (AVUV) has advanced 31.3%.

Small Cap ETFs Post Yet Another Month in the Green

Ballast Asset Management (“Ballast”), a fundamental equity manager, launched the Ballast Small/Midcap ETF (NYSE: MGMT) on Thursday. This is one of the first ETFs to trade small capitalization equities actively.

News for Ballast Small/Mid Cap ETF ETF (MGMT)