The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Alpha Architect US Quantitative Momt ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's management team is about as experienced as others, but due to other weaknesses, the strategy earns a Below Average People Pillar. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in momentum exposure and liquidity exposure compared with category peers. Momentum exposure is attributed to holding stocks currently on a winning streak and selling those that are on a downtrend. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The strategy's parent firm has some investor-friendly attributes, like overall affordable fees, but it is held back by discontinuity among portfolio managers. As a result, the firm gets an Average Parent Pillar rating.

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. Alpha Architect US Quantitative Momt ETF earns an Average Process Pillar rating. 

The leading factor in the rating is the fund's excellent long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. The process is limited by the parent firm's five-year risk-adjusted success ratio of 17%. 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 subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy, over time, has preferred smaller market-cap companies, compared with others in the Mid-Cap Growth Morningstar Category.  But in terms of investment style, it is on par with peers. Analyzing additional factors, this strategy has consistently had exposure to high-momentum stocks compared with Morningstar Category peers over the past few years. Momentum is based on the premise that stocks that have recently outperformed will continue to outperform, and those that have underperformed will stay behind. In recent months, the strategy was more exposed to the Momentum factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt towards more high-liquid assets over peers in recent years, evidenced by consistently holding companies with relatively higher trading volumes. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. In this month, the strategy also had more exposure to the Volatility 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 and consumer cyclical relative to the category average by 12.2 and 5.4 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and financial services, underweight the average by 16.3 and 6.2 percentage points of assets, respectively. The strategy owns 52 securities and its assets are more dispersed than peers in the category. In particular, 23.2% of the strategy's assets are concentrated in the top 10 fund holdings, compared to the typical peer's 26.1%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 193% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Alpha Architect US Quantitative Momt ETF earns a Below Average People Pillar rating. The team is strengthened by the strategy's costs, which rank in its category's least expensive fifth. A higher expense ratio reduces net returns, so low costs give this team an advantage. However, the rating is limited by the instability of talent across its parent firm. The firm's asset-weighted manager tenure of five years suggests it could do more to retain portfolio managers. The parent firm's five-year success ratio of 33% also holds the rating back. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.


The team is backed by Wesley R. Gray, the longest-tenured manager on the strategy, who provides 15 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 fallen below the category average. Wesley R. Gray has an adequate backdrop of support, drawing on three additional listed managers, averaging seven years of listed portfolio management experience.

Below Average

People

In a competitive industry, Alpha Architect doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One notable advantage of Alpha Architect is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the lowest quintile of category peers. A detractor from the firm's rating is its lower-than-average portfolio management retention over the past five years, as elevated turnover bears watching. With an average five-year Morningstar Rating of 2.0 stars, the risk-adjusted performance of Alpha Architect's open-end and exchange-traded funds falls short of competitors.

Parent

Alpha Architect US Quantitative Momentum ETF

QMOM is an active, equal-weighted portfolio of US stocks, screened for their strong and consistent momentum.

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Alpha Architect is switching its ETFs over to active management. Effective Monday, the Alpha Architect International Quantitative Momentum ETF (IMOM), the Alpha Architect International Quantitative Value ETF (IVAL), the Alpha Architect U.S. Quantitative Momentum ETF (QMOM), the Alpha Architect U.S. Quantitative Value ETF (QVAL), and the Alpha Architect Value Momentum Trend ETF (VMOT) have changed from being passively managed (tracking [.

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