Weakness in Rayliant Quantamental China Equity ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Below Average People Pillar. The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight liquidity exposure and has a substantial overweight in momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And momentum exposure is rooted in holding stocks currently on a winning streak. The strategy's parent organization is industry standard, albeit with some strong attributes like a favorable lineup success ratio, but is held back by above-average turnover among its portfolio managers. This earns the firm an Average Parent Pillar rating.

Analyst Rating

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. Rayliant Quantamental China Equity ETF earns a Below Average Process Pillar rating. 

The process is bolstered by a low expense ratio, with fees ranking in its category's least expensive fifth. A higher expense ratio reduces net returns, so being affordable gives this fund a substantial advantage. However, the rating is held back by the parent firm's five-year retention rate of 60%, which suggests it could do more to hold onto its portfolio managers. Being an actively managed strategy also detracts from the process. Historical data, like Morningstar's Active/Passive Barometer, shows that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy leans toward smaller, higher-growth companies than its average peer in the China Region Morningstar Category. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. 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 more exposure to high-momentum stocks over peers in recent years. Momentum approaches bet that rising stocks will continue to rise and that lagging stocks will continue to lag. Compared with category peers, the strategy also had more exposure to the Momentum factor in the most recent month. In addition, this strategy has favored high-quality stocks compared to peers over the years, which could be a good option for downside risk protection. Though it may trail peers during an economic boom, this orientation contributes to helping it weather periods of economic stress better. In recent months, however, the strategy had less Quality factor exposure 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 industrials and consumer defensive relative to the category average by 17.3 and 5.7 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 16.0 and 12.8 percentage points of assets, respectively. The portfolio is positioned across 125 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 29.6% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 36.3%. And finally, in terms of portfolio turnover, on a year-over-year basis, 325% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

Rayliant Quantamental China Equity ETF earns a Below Average People Pillar rating. The rating is weakened by the turnover of management across its parent firm. The firm's asset-weighted manager tenure of three years suggests it could do more to retain portfolio managers. The turnover of its management team also detracts from the team. The fund last saw a manager change two years ago.


Jason Hsu, the longest-tenured manager on the strategy, provides strong guidance, offering 21 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, demonstrating average risk-adjusted performance. Jason Hsu has an experienced backdrop of support. The three listed managers boast 12 years of average listed portfolio management experience.

People

In a competitive industry, Rayliant doesn't differentiate itself enough, leading to an Average Parent Pillar rating. The firm's lasting product shelf is its strength. Its three-year risk-adjusted success ratio of 100% means that 100% of its strategies have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. Rayliant has undergone a bout of turnover in the past five years, as seen in its lower-than-average portfolio manager retention. This is a concern, as long-term stability tends to support positive results. A notable weakness of Rayliant 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 three years of average tenure across their management team, there is cause for concern.

Average

Parent

Rayliant Quantamental China Equity ETF

RAYC is an actively managed portfolio of Chinese stocks selected and weighted based on a combination of quantitative and fundamental, quantamental, proprietary research.

Rayliant SMDAM Japan Equity ETF

LOS ANGELES--(BUSINESS WIRE)---- $RAYC--Rayliant Global Advisors, with Sumitomo Mitsui DS Asset Management (SMDAM), announced the launch of the Rayliant SMDAM Japan Equity ETF (RAYJ).

Rayliant Partners with Sumitomo Mitsui DS Asset Management to Launch Rayliant SMDAM Japan Equity ETF (RAYJ)

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News for Rayliant Quantamental China Equity ETF ETF (RAYC)