Invesco ESG NASDAQ Next Gen 100 ETF earns a Morningstar Medalist Rating of Neutral 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 cheapest fee quintile among peers.  

 The strategy earns 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 yield exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The management team's considerable industry experience earns it an Above Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like an experienced bench of portfolio managers, but is held back by high portfolio manager turnover. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Coca-Cola European Partners plc

ICON

Take-Two Interactive Software

Tractor Supply

MongoDB

J.B. Hunt Transport Services

Ulta Beauty

Splunk

Western Digital

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 ESG NASDAQ Next Gen 100 ETF earns a Below Average Process Pillar rating. 

The process is bolstered by the size of its portfolio management team. With four portfolio managers at the helm, the fund is reasonably well-resourced. However, the rating is limited by the parent firm's five-year risk-adjusted success ratio of 39%. 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. The parent firm's five-year retention rate of 68% also holds the rating back.

 This strategy prefers more value-oriented stocks compared with the average fund in its peer group, the Mid-Cap Growth Morningstar Category. But in terms of market capitalization, it is on par with peers. Looking at additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to experience a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The managers have also tended to overweight yield during recent years, shown by the portfolio's high exposure to dividends or buybacks. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. Additionally, the strategy has demonstrated a contrarian approach with relatively low exposure to momentum stocks during these 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. In recent months, the strategy also had less Momentum 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 technology and communication services relative to the category average by 18.5 and 6.8 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and industrials, underweight the average by 8.9 and 5.4 percentage points of assets, respectively. The portfolio has 94 holdings and is about as top-heavy as the category average, with 23.4% of assets in the top 10 holdings. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

Below Average

Process

Despite managers' lack of personal investments, Invesco ESG NASDAQ Next Gen 100 ETF benefits from an experienced corps of managers. As the latter outweighs the former, the strategy earns an Above Average People Pillar rating. Peter Hubbard’s veteran status, with 16 years of portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 3.1 stars, reflecting average risk-adjusted performance relative to category peers. Peter Hubbard is supported by an experienced team, being able to draw on three additional listed managers, who average 11 years of portfolio management experience. As a team, they manage 142 investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate.  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.

Above Average

People

Invesco, with USD 1.3 trillion in AUM, tries to cover a great many bases. The firm succeeds in a number of areas but also has its share of subpar offerings, along with many others somewhere in the middle. The firm retains a Morningstar Parent rating of Average.
Invesco is now 3.5 years past the closing of its merger with OppenheimerFunds. While there were some glitches, overall the process avoided the pitfalls that can accompany such corporate actions. On the positive side, Invesco’s international-equity teams—its EQV team in Texas and the New York-based group inherited from Oppenheimer—remain strong points. The firm’s ETF lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 30% of Invesco’s AUM. 
However, the extensive U.S.-equity lineup remains a weak link despite manager shuffles aimed at bolstering poor performers. The retirement of Meggan Walsh, who managed the relatively few appealing offerings in that group, didn’t help. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive.
Invesco has a substantial presence outside the U.S., but fund performance has been subpar in Asia, with manager turnover an ongoing concern. In the U.K. and Europe, the picture has brightened, but that region still can’t be considered a strength.

Average

Parent

Invesco ESG Nasdaq Next Gen 100 ETF

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Invesco ESG Nasdaq 100 ETF

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Invesco Nasdaq 100 ETF

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