Putnam Focused Large Cap Growth 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 sizable cost advantage over competitors, priced within the 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 an underweight position in yield exposure and volatility exposure compared with category peers. Low yield exposure is attributed to holding fewer stocks with high dividend or buyback yields -- instead, typically holding companies with a stronger focus on growth opposed to returning capital. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. 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

iShares S&P 500 Growth ETF

Microsoft

NVIDIA

Amazon

Apple

Alphabet

Eli Lilly

Costco

Mastercard

Chipotle

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. Putnam Focused Large Cap Growth ETF earns an Above Average Process Pillar rating. 

The main contributor to the rating is the firm's five-year retention rate of 77% over the period. The process is limited by its parent firm's disappointing risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.5 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy owns more growth stocks than its peers in the Large Growth Morningstar Category. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Looking at additional factor exposure, this strategy has constantly downplayed yield, with its portfolio holding fewer companies with high dividend or buyback yields compared with Morningstar Category peers in recent years. Its preference for stocks with lower yields may well lead to a growthier portfolio. However, growth stocks court additional risks if their forecasts do not come to fruition and are often more volatile than companies with stable dividends. In the latest month, the strategy was also less exposed to the Yield factor compared with Morningstar Category peers. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. Compared with category peers, however, the strategy had more exposure to the Volatility factor in the most recent month. In addition, this strategy has taken on exposure to high-momentum stocks in these years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In this month, the strategy also had more exposure to the Momentum factor over 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 technology by 7.4 percentage points in terms of assets compared with the category average, and its consumer cyclical allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and healthcare, with industrials underweighting the average portfolio by 3.7 percentage points of assets and healthcare similar to the average. The portfolio is positioned across 38 holdings and is relatively top-heavy. Of the strategy's assets, 57.6% are concentrated within the top 10 holdings, compared to the category’s 54.8% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 45% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Putnam Focused Large Cap Growth ETF earns an Average People Pillar rating. Greg McCullough’s veteran status, with over 25 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 4.6 stars, demonstrating impressive risk-adjusted performance. Greg McCullough has an experienced listed co-manager. Together, they average over 25 years of listed portfolio management experience. As a team, they manage eight investment vehicles together, with an asset-weighted average Morningstar Medalist Rating of Neutral. This means, in aggregate, the team falls short and will struggle to produce positive alpha. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Parent

Putnam Focused Large Cap Growth ETF

PGRO is an actively-managed, non-transparent fund that invests in US large-cap growth companies. The fund utilizes the Fidelity non-transparent model.

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