Weakness in ProShares Online Retail ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy receives a Low 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 volatility exposure compared with category peers. 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 team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like overall reasonable fees, but is held back by an unfavorable average Morningstar Rating. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Amazon

eBay

Carvana

Wayfair

Williams-Sonoma

Coupang

Chewy

Beyond Inc

FIGS

Buckle

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. ProShares Online Retail ETF earns a Low Process Pillar rating. The main driver of the rating is the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year risk-adjusted success ratio of 38% also weakens the process. The measure indicates the percentage of a firm's funds that survived and beat 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. The parent firm's five-year retention rate of 58% limits the rating further.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index (the index).  Under normal circumstances, the fund will invest at least 80% of its total assets in component securities of the index. The index is designed to measure the performance of publicly traded companies that principally sell online or through other non-store sales channels, such as through mobile or app purchases, and rather than through "bricks and mortar" store locations. The fund is non-diversified. 

 The portfolio is overweight in consumer cyclical by 17.8 percentage points in terms of assets compared with the category average, and its financial services allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and consumer defensive, underweight the average by 8.3 and 4.3 percentage points of assets, respectively. The portfolio is positioned across 21 holdings and is quite concentrated. Specifically, 75.3% of the portfolio's assets are housed within the top 10 holdings, as opposed to the category average of 44.1%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 97% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Process

ProShares’s team receives a Below Average People Pillar rating. The team benefits from the fund's structure. It tracks an index, which is helpful because historical data, like Morningstar's Active/Passive Barometer, finds that index funds have generally outperformed their active counterparts, especially over the long term. However, the rating is weakened by the parent firm's five-year success ratio of 27%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 58% also limits the team.

Below Average

People

In a competitive industry, ProShares doesn't differentiate itself enough, leading to an Average Parent Pillar rating. A strength of ProShares is that its product shelf of open-end and exchange-traded funds is, on average, offered at a minimal cost, suggesting that it considers what's best for its investor base. On average, fees for funds are in the lowest quintile of respective category peers. Looking at the firm's risk-adjusted performance, the product lineup compares similarly to competitors. Across its open-end and exchange-traded funds, the firm's average 10-year Morningstar Rating is 3.1 stars. ProShares has faced above-average manager turnover in the past five years. This is a concern, as long-term stability tends to support positive results.

Average

Parent

Proshares Online Retail ETF

ONLN tracks a global, modified market-cap weighted index of stocks issued by companies classified as online retailers.

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