The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  Macquarie Energy Transition ETF to a Morningstar Medalist Rating of Neutral.  The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy receives a Below 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 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

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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. Macquarie Energy Transition ETF earns a Below Average Process Pillar rating. 

The process benefits from its relatively concentrated portfolio, with its top 10 holdings accounting for 46% of assets. High-conviction picks court the risk of blowing up, but can also drive outperformance. However, the rating is held back by the parent firm's five-year risk-adjusted success ratio of 47%. The measure indicates the percentage of a firm's funds that survived and outperformed 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 parent firm's five-year retention rate of 50% also detracts from the process.

 This strategy skews toward smaller, more growth-oriented companies compared with its average peer in the Equity Energy Morningstar Category. Analyzing additional factors, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. 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 a bias towards lower-momentum stocks over its peers over the past years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. 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. Such positions do not tend to provide much ballast for a portfolio. 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 basic materials and technology relative to the category average by 38.9 and 11.6 percentage points, respectively. The sectors with low exposure compared to category peers are energy and utilities, underweight the average by 49.6 and 6.4 percentage points of assets, respectively. The portfolio is composed of 42 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 45.7% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category average's 51.2%.

Below Average

Process

Macquarie Energy Transition ETF earns an Average People Pillar rating. Samuel L. Halpert, the longest-tenured manager on the strategy, boasts 24 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.2 stars, indicating that their risk-adjusted returns have underperformed the category average. Despite having a small team, the two listed managers boast 15 years of listed portfolio management experience. As a team, they manage five investment vehicles together, with a Negative asset-weighted average Morningstar Medalist Rating, indicating the team is positioned to generate negative alpha in aggregate. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

 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

Macquarie Asset Management is part of Macquarie Group, whose interests span banking, advice, and funds management. Asset management has grown considerably since Macquarie pioneered an infrastructure business in the 1990s, totaling about AUD 770 billion (at March 2022) split roughly 70/30 in public/private markets. In Australia, Macquarie also distributes third-party managers catering to high-net-worth clients. Macquarie has methodically integrated U.S.-based Delaware Investments since acquiring it in 2009. This is especially visible in fixed interest, a significant component following several years of successful and stable management. Macquarie’s opportunism has its merits, though it can engender staffing and product distractions when integrating overlapping capabilities, such as Waddell & Reed (Ivy Investments) and AMP Capital in 2021/22. More pertinently, across the substantial footprint of public market assets beyond fixed interest, we see few examples of clear strength or conditions that are clearly conducive to maintaining lasting success. When allied to an uneven history with internally managed equity capabilities (including Australian fundamental and Asian equities), we are more circumspect. That said, fund performance influences 70% of variable staff remuneration, which helps investor alignment, while longer-term remuneration comes via gradually vesting Macquarie stock.

Parent

Macquarie Energy Transition ETF

PWER is an actively managed fund that invests in global companies across various sectors that facilitate transition to low carbon energy sources and lower emission power production.

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News for Macquarie Energy Transition ETF ETF (PWER)