VanEck Morningstar Wide Moat ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average 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 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 strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

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. VanEck Morningstar Wide Moat ETF earns an Above Average 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. Impressive risk-adjusted performance also contributes to 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. 

 This strategy leans toward smaller, more value-oriented companies than its average peer in the Large Blend Morningstar Category. Analyzing additional factors, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has had lower exposure to momentum stocks over peers in recent years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. In recent months, the strategy also had less Quality 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 industrials and healthcare relative to the category average by 8.5 and 6.7 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 12.3 and 4.2 percentage points of assets, respectively. The portfolio is positioned across 50 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 28.1% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category average's 48.8%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 51% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

VanEck’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There are two managers listed on the fund: Peter Liao, Griffin Driscoll. Together, they manage a total of 13 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

VanEck’s ownership structure and specialization make it unique among industry peers. The firm’s founding family and namesake still have control, and its product lineup still reflects its legacy as a specialist in niche market segments. VanEck earns an Average Parent Pillar rating. 

Founded by John van Eck in 1955, the firm staked its claim in the industry by capitalizing on burgeoning markets. Starting with the opening of Western Europe to U.S.-based investors in the wake of the Marshall Plan, VanEck’s largest and most successful products provide exposure to areas of the market that are off the beaten path, such as hard assets, emerging-markets debt, and below-investment-grade-rated corporate debt.

Through its history, VanEck has taken an opportunistic approach to product development. For instance, since 2018, VanEck has launched strategies that provide exposures ranging from international REITs to companies involved in video game development. Regardless of where their reach takes them, however, VanEck builds a case that the strategy will be relevant over the long term and that its risks must be easy to understand. However, not all its products catch on, and the firm has shuttered several offerings in the last decade. 

VanEck remains a privately held firm, wholly owned by CEO Jan van Eck and his family. Although this enables the firm to focus on the long term and the firm offers some employees participation in profits, the firm hasn’t used equity as a recruiting and retention tool and introduces some key-person risk in the executive suite.

Parent

VanEck Morningstar Wide Moat ETF

MOAT tracks a staggered, equal-weighted index of 40 US companies that Morningstar determines to have the highest fair value among firms with a sustainable competitive advantage.

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When it comes to the combination of wide moat investing and exchange traded funds, the VanEck Morningstar Wide Moat ETF (MOAT) sets the standard. MOAT turns 12 years old next week and now has $14.4 billion in assets under management as well as a lengthy track record of beating broader, old-guard equity benchmarks.

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Launched on 04/24/2012, the VanEck Morningstar Wide Moat ETF (MOAT) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Blend segment of the US equity market.

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The Wide Moat ETF (MOAT) has attracted about $335 million in net flows year to date through January 25, per etf.com. The fund has accumulated net flows of $4.9 billion over the course of a year.

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Three VanEck ETFs have seen considerable investor attention in 2024 to date. Reflecting VanEck's diverse range of ETF offerings, the three most popular ETFs, as measured by net flows, comprise a growthy thematic ETF, a value-tilted fund, and a compelling fixed income product.

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MOAT is a strategy that attempts to identify companies with strong long-term competitive advantages. MOAT uses the Morningstar Wide Moat Index as the basis for this identification. I believe that MOAT is a strong candidate for inclusion in any investor's portfolio.

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By Coulter Regal, CFA, Product Manager Moat stocks once again dominated the S&P 500 in 2023, as the Moat Index surged 32.41% versus the S&P 500's 26.3% gain in 2023. U.S. equity markets ended 2023 on a high note in December with a year-end rally that led major U.S.

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By Brandon Rakszawski, Director of Product Management The Moat Index underwent its quarterly review on December 15, resulting in a continued underweight to Magnificent 7 stocks and a value bias with a slight small cap tilt. The Morningstar® Wide Moat Focus IndexSM (the “Moat Index” or “Index”) underwent its quarterly review on December 15, 2023.

Investing Beyond the Magnificent 7

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The major S&P 500 ETFs dominate the ETF market, with about $1.73 trillion in assets under management or around 30% of all ETF allocation. Market capitalization-weighted strategies have become popular, potentially leading to artificially strong performance and potential market dislocation. The VanEck MOAT ETF offers a different approach, focusing on large-cap stocks with competitive advantages and attractive valuations.

News for VanEck Morningstar Wide Moat ETF ETF (MOAT)