Texas Capital Texas Oil Index ETF’s management team is rated Average, but a solid investment process still helps this strategy 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's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight 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 the passive strategy earns the strategy an Average People Pillar rating. The strategy's parent firm has some investor-friendly attributes, like overall attractive fees and minimal portfolio manager turnover. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

Exxon Mobil

Diamondback Energy

Occidental Petroleum

ConocoPhillips

APA Corporation

EOG Resources

Chevron

Devon Energy

SM Energy

Ovintiv

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Texas Capital Texas Oil Index ETF earns an Above Average Process Pillar rating. The leading factor in 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. The firm's five-year retention rate of 100% also contributes to the process. Lastly, the process is limited by the number of months that the management team has been running this vehicle together.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Alerian Texas Weighted Oil and Gas Index.  The fund seeks to achieve its investment objective by investing at least 80% of its assets in securities included in its underlying index, and in depositary receipts representing securities included in its underlying index and in underlying stocks in respect of depositary receipts included in its underlying index. The index is an economic-value weighted index providing exposure to companies that extract oil and gas within Texas. The fund is non-diversified. 

 The portfolio is overweight in energy by 9.0 percentage points in terms of assets compared with the category average, and its consumer defensive allocation is similar to the category. The sectors with low exposure compared to category peers are utilities and industrials, with utilities underweighting the average portfolio by 3.5 percentage points of assets and industrials similar to the average. The strategy owns 34 securities and is quite concentrated. In particular, 58.2% of the fund’s assets are housed within the top 10 holdings, versus the category average of 51.2%.

Above Average

Process

Texas Capital’s team receives An Average People Pillar rating. The main contributor to the rating is the firm's five-year retention rate of 100%. A low cost, with fees that rank in its category's least costly quintile, also bolsters the rating. A higher expense ratio reduces net returns, so low costs give this team an advantage. Lastly, the rating is limited by the number of months that the management team has been running this vehicle together. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.

Average

People

Even though Texas Capital's limited history of eight months as a firm is working against its rating, they've proven to be an industry-standard steward, warranting an Average Parent Pillar rating. The firm currently manages three vehicles, with a total of $48.3 million under management across a bench of two strategy managers. Despite its short history as a firm, its portfolio managers have built significant experience elsewhere, with an average of over 14 years in the industry. The firm's earliest portfolio manager hire, J. Steven Orr, has more than 20 years of industry experience. 
 
 The below-average fees of Texas Capital's open-end and exchange-traded funds display a commitment to maximizing investor returns. The average net expense ratio for its funds ranks within the cheapest quintile of peer asset managers.  

 As Texas Capital builds and continues to develop a track record, its rating will be adjusted accordingly.

Parent

Texas Capital Texas Oil Index ETF

OILT is passively managed ETF, tracking an economic-value weighted index that contains stocks of companies that extract oil and gas within Texas. The resulting portfolio is a narrow basket of approximately 30 stocks.

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