Invesco Dorsey Wright Momentum ETF earns a Morningstar Medalist Rating of Negative with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy gets a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And momentum exposure is rooted in holding stocks currently on a winning streak. The strategy’s management team earns an Above 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. Invesco Dorsey Wright Momentum ETF earns a Low Process Pillar rating. 

The primary detractor from the rating is the fund's unremarkable 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 subpar risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.8 stars, also detracts from the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis. The parent firm's five-year retention rate of 67% limits the rating further.

 This strategy, over time, has preferred smaller market-cap companies, compared with others in the Large Growth Morningstar Category.  But in terms of style (value/growth) exposure, it is similar. Looking at additional factor exposure, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also demonstrated more exposure to high-momentum stocks over peers in recent years. Momentum strategies wager that market outperformers will continue to outperform, and laggards will continue to lag. Higher exposure to the former could mean the managers are overweighting stocks on winning streaks. In the most recent month, however, the fund's Momentum exposure was in line with the Morningstar Category average. In addition, this strategy has not maintained a defensive tilt, demonstrated by low exposure to the quality factor. This means the fund avoids holding firms that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. 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 energy relative to the category average by 23.2 and 3.5 percentage points, respectively. The sectors with low exposure compared to category peers are technology and communication services, underweight the average by 10.9 and 9.5 percentage points of assets, respectively. The portfolio is positioned across 102 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 24.4% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 54.8% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 140% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Process

Invesco’s equity team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are four managers listed on the fund: Michael Jeanette, Peter Hubbard, Tony Seisser, Pratik Doshi. The team is well equipped, with an average of 12 years of portfolio management experience. Together, they manage a total of 144 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. This group has been working together for a while and has been successful in retaining talent compared to peers, with no departures in the last five years.  

 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.

Above Average

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Average

Parent

Invesco DWA Momentum ETF

PDP tracks an index of 100 US-listed large- and mid-cap companies selected and weighted by relative stock performance.

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