Weakness in QRAFT AI-Enhanced US Large Cap ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy's inexperienced portfolio management team drives the strategy's Low People Pillar. The strategy earns a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and has an overweight in liquidity exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. To be considered a quality steward, this strategy's parent organization needs to improve factors like a lack of inside investments from portfolio managers and a relatively inexperienced portfolio management team. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Apple

Amazon

Alphabet

Eli Lilly

Broadcom

Walmart

Mastercard

Procter & Gamble

Johnson & Johnson

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. QRAFT AI-Enhanced US Large Cap ETF earns a Low Process Pillar rating. 

The main detractor from the rating is the parent firm's five-year risk-adjusted success ratio of 0%. 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 subpar success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 64% also holds the process back. Management team experience, which averages four years at this fund, detracts from the rating as well.

 This strategy tends to hold smaller, more undervalued companies than its average peer in the Large Growth Morningstar Category. Examining additional factor exposure, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. 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. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. In this month, the strategy also had more exposure to the Yield 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 consumer defensive by 4.5 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and consumer cyclical; however, the allocations are similar to the category. The strategy owns 352 securities and is less top-heavy than peers. Specifically, 42.6% of the fund’s assets are concentrated within the top 10 fund holdings, as opposed to the category’s 54.8% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 348% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Process

QRAFT AI-Enhanced US Large Cap ETF earns a Low People Pillar rating. The number one detractor from the rating is the experience of the management team, which averages four years at this fund. Turnover at its parent firm also holds the team back. The firm's asset-weighted manager tenure of four years suggests it could do more to retain portfolio managers. The parent firm's five-year success ratio of 0% further detracts from the team. 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.


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.

People

Exchange Traded Concepts lags peer asset managers in a number of stewardship qualities, resulting in a Below Average Parent Pillar rating. Portfolio managers at Exchange Traded Concepts tend not to invest alongside their shareholders, detracting from the overall stewardship assessment. None of the firm’s assets are covered by an invested manager. A notable weakness of Exchange Traded Concepts is the inexperience of its longest-tenured managers compared with other asset managers. Managing capital through a full market cycle is a challenging prospect for seasoned managers, but with only four years of average asset-weighted tenure, there's cause for concern. The firm charges fees on its open-end and exchange-traded funds that are on par with category peers. On average, fund fees on its products fall in the middle quintile, giving it neither an advantage nor disadvantage compared with the competition.

Below Average

Parent

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