A sound investment process and strong management team underpin Invesco Water Resources ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the second-lowest 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 a significant underweight position in volatility exposure and yield exposure compared with category peers. Low volatility exposure is attributed to stocks with a lower standard deviation of returns. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. 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

Ferguson PLC

Ecolab

Danaher

Roper Technologies

American Water Works

Core & Main

Veralto Corp

Xylem

Pentair

A. O. Smith

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. Invesco Water Resources ETF earns an Above Average Process Pillar rating. The primary contributor to 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 process is limited by the parent firm's five-year risk-adjusted success ratio of 44%. 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 modest success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the investment results (before fees and expenses) of the NASDAQ OMX U.S. Water IndexSM (the "underlying index").  The fund generally will invest at least 90% of its total assets in securities that comprise the underlying index. The underlying index seeks to track the performance of companies that create products designed to conserve and purify water for homes, businesses and industries. The underlying index may include common stocks, ordinary shares, American depositary receipts ("ADRs"), and shares of beneficial interest and tracking stocks. The fund is non-diversified. 

 The portfolio is overweight in industrials and healthcare relative to the category average by 45.7 and 10.3 percentage points, respectively. The sectors with low exposure compared to category peers are basic materials and energy, underweight the average by 40.6 and 26.9 percentage points of assets, respectively. The strategy owns 41 securities and is relatively concentrated. Specifically, 58.5% of the strategy's assets are housed within the top 10 holdings, compared with the typical peer's 25.3%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 32% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Invesco Water Resources ETF benefits considerably from its equity team, earning it an Above Average People Pillar rating. There are four managers listed on the fund: Peter Hubbard, Tony Seisser, Michael Jeanette, Pratik Doshi. The team is well equipped, with an average of 12 years of portfolio management experience. Together, they manage a total of 145 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.

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 Water Resources ETF

PHO tracks a modified liquidity-weighted index of US-listed companies that create products to conserve and purify water.

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News for Invesco Water Resources ETF ETF (PHO)