Weakness in VictoryShares WestEnd U.S. Sector ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy's management team is about as experienced as others, but due to other weaknesses, the strategy earns a Low People Pillar. The strategy gets a Below Average Process Pillar rating.  High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. 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

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Eli Lilly

UnitedHealth Group

Johnson & Johnson

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. Victoryshares Westend U.S. Sector ETF earns a Below Average Process Pillar rating. 

The process is strengthened by the size of its portfolio management team. With four portfolio managers at the helm, the fund is reasonably well-resourced. However, the rating is limited by the parent firm's five-year risk-adjusted success ratio of 48%. The measure indicates the percentage of a firm's funds that survived and outperformed 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. Management team experience, which averages six years at this fund, also holds the rating back.

 This strategy skews toward smaller, higher-growth companies compared with its average peer in the Large Blend Morningstar Category. Analyzing additional factors, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In recent months, the strategy was more exposed to the Liquidity 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. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Additionally, this strategy has had lower yield exposure than peers, with the portfolio holding fewer stocks with high dividend or buyback yields 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 healthcare and communication services relative to the category average by 16.5 and 6.8 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and financial services, underweight the average by 10.1 and 5.9 percentage points of assets, respectively. The strategy owns 351 securities and is less top-heavy than peers. Specifically, 35.9% of the portfolio's assets are concentrated within the top 10 fund holdings, as opposed to the category’s 49.5% average. And in closing, in terms of portfolio turnover, this fund trades more frequently than its average peer, potentially racking up additional expenses for investors and creating a drag on performance.

Below Average

Process

Victoryshares Westend U.S. Sector ETF earns a Low People Pillar rating. The main determinant of the rating is the parent firm's five-year success ratio of 46%. 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 subpar success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 51% also detracts from the team. The experience of the management team, which averages six years at this fund, limits the team as well.

People

As Victory Capital Management expands a roster of investment teams that runs the gamut,  it retains an Average Parent rating.

Victory operates a multiaffiliate model. It centralizes operations, compliance, and distribution while giving its 12 franchises investment autonomy. The franchise lineup had long been composed of those primarily focused on small/mid-cap equities. But the 2019 acquisition of fixed-income shop USAA Investments (which was rebranded as Victory Income Investors in April 2023) represented a significant change to that model. The firm has continued to broaden from there, acquiring three new franchises since the start of 2021: THB Asset Management (an environmental, social, and governance specialist), New Energy Capital (an alternatives manager), and WestEnd Advisors (a third-party model strategist). Overall, Victory is as big and diverse as ever: Its assets under management as of March 2023 was $157.6 billion, much higher than the $52.8 billion level as of December 2018.

Victory’s bright spots include Sycamore Capital and Trivalent Investments, which boast strong investment cultures, good levels of manager ownership, and solid capacity management processes. But there are questions elsewhere. Victory Capital Solutions has made some questionable subadvisor changes and dubious exchange-traded fund launches in recent years; Victory Income Investors has seen several departures since the 2019 acquisition and will absorb another franchise, Incore, in September 2023.

Average

Parent

Victoryshares Westend US Sector ETF

MODL actively invests in sector-based US ETFs that may achieve favorable returns from current market conditions and macroeconomic factors.

On this episode of the “ETF of the Week” podcast, VettaFi's Head of Research Todd Rosenbluth discussed the VictoryShares WestEnd US Sector ETF (MODL) with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.

VIDEO: ETF of the Week: VictoryShares WestEnd US Sector ETF (MODL)

VettaFi's Head of Research Todd Rosenbluth discussed the VictoryShares WestEnd US Sector ETF (MODL) on this week's “ETF of the Week” podcast with Chuck Jaffe of “Money Life.” For more news, information, and analysis, visit VettaFi | ETF Trends.

ETF of the Week: VictoryShares WestEnd US Sector ETF (MODL)

With the end of the free money era, fundamentals and management quality matter more now than they did in the 2010s, underscoring the role of active ETFs. Active ETFs are gathering market share in 2024 as investors recognize the need for quality management in the more challenging current market environment.

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Main Sector Rotation ETF

The fund evaluates the macroeconomic and market environment.

Victory Capital Launches ETF Mirroring US Sector Strategy

Victory Capital Holdings

SAN ANTONIO, Texas--(BUSINESS WIRE)---- $VCTR--Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or the “Company”) today announced that its wholly owned investment adviser, Victory Capital Management Inc., has launched a new active exchange-traded fund (ETF), VictoryShares WestEnd U.S. Sector ETF (MODL).

News for Victoryshares Westend US Sector ETF ETF (MODL)