Weakness in Rayliant Quantamental Emer Mkt Eq ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest 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 a significant overweight position in momentum exposure and quality 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 quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The longest-tenured manager has a wealth of experience, but other weaknesses limit it to a Below Average People Pillar rating. 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

IQVIA Hlds

Nuvn PA Mun Val Shs of Benef Interest

Natural Resource Partners

BkRkNY

Mobile TeleSystems

Molina Healthcare

Zhong Yang Financial Group Ltd

OUTFRONT Media

Biglari Hlds

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 Emer Mkt Eq ETF earns a Below Average Process Pillar rating. 

The process is strengthened by low costs across its parent firm's funds, whose fees rank in their respective category's second-cheapest quintile on average. The pattern of low expenses at the firm suggests that it is focused on delivering strong results for investors. 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, such as Morningstar's Active/Passive Barometer, shows that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy tends to pick smaller market-cap companies compared with the average fund in its peer group, the Diversified Emerging Mkts Morningstar Category.  But in terms of investment style, it is on par with peers. Looking at additional factor exposure, this strategy has continually had exposure to high-momentum stocks compared with Morningstar Category peers in the last few years. Momentum strategies wager that market outperformers will continue to outperform, and laggards will continue to lag. Higher exposure to the former could mean the managers are overweighting stocks on winning streaks. In recent months, the strategy was more exposed to the Momentum factor compared with its Morningstar Category peers as well. This strategy also has tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity, during these years. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. Compared with category peers, the strategy also had more exposure to the Quality 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. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In recent months, however, the strategy had less Yield 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 technology by 9.6 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 basic materials and consumer cyclical, underweight the average by 4.5 and 3.7 percentage points of assets, respectively. The strategy owns 171 securities and is relatively concentrated. Specifically, 30.7% of the fund’s assets are housed within the top 10 holdings, as opposed to the category’s 25.4% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 367% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Rayliant Quantamental Emer Mkt Eq ETF earns a Below Average People Pillar rating. The team benefits from that at least one manager has invested more than $1 million in the strategy, which aligns their interests with fundholders. However, the rating is weakened by the instability of talent across its parent firm. The firm's asset-weighted manager tenure of three years suggests it could do more to retain portfolio managers. The instability of its management team also holds the rating back. The fund last saw a manager change two years ago.


Jason Hsu’s veteran status, with 21 years of listed portfolio management experience, brings a wealth of experience to the table. The strategies they currently manage have an average Morningstar Rating of 3.0 stars, demonstrating average risk-adjusted performance compared with category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 12 years of 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 Emerging Market Equity ETF

RAYE is an actively managed portfolio of emerging market equities that are selected and weighted using a combination of quantitative and fundamental, quantamental, proprietary research.

RAYE is an actively managed portfolio of emerging market ex-China equities that are selected and weighted using a combination of quantitative and fundamental, quantamental, proprietary research.

Rayliant SMDAM Japan Equity ETF

On Thursday, Rayliant brought its fourth ETF to market with the launch of the Rayliant SMDAM Japan Equity ETF (NYSE Arca: RAYJ). The fund invests in mid- and large-cap companies domiciled in Japan or that have a significant business presence there.

Rayliant Adds Active Japan ETF to Lineup

Rayliant Quantamental China Equity ETF

Rayliant Quantitative Developed Market Equity ETF

Some asset managers may decide it's worthwhile to hand over some of the revenue that their exchange-traded funds collect via Fidelity Investments' brokerage platform to pay for its support agreement — if they haven't decided to do so already.

Fidelity's new service charge poses ‘existential' threat to some ETFs

iShares Emerging Markets Dividend ETF

Pacer Emerging Markets Cash Cows 100 ETF

iShares MSCI Emerging Markets ETF

Matthews Emerging Markets Ex China Active ETF

Columbia EM Core ex-China ETF

Emerging market ETF investing can gain steam this year due to undervaluation, likely halt in Fed rate hikes, falling EM inflation and higher growth rates (than developed economies).

Time for Emerging Markets ETFs?

Loncar China Biopharma ETF

Loncar Cancer Immunotherapy ETF

Parabla Innovation Etf

Advocate Rising Rate Hedge ETF

SPDR S&P 500 ETF Trust

AXS Brendan Wood TopGun Index ETF

Kurv Yield Premium Strategy Apple AAPL Etf

FT Cboe Vest Laddered Moderate Buffer ETF

Simplify Developed EX-US Plus Downside Convexity

Simplify Emerging Markets Equity Plus Downside Convexity ETF

First Trust MLP & Energy Income Fund

First Trust Energy Income and Growth Fund

First Trust Energy Infrastructure Fund

First Trust New Opportunities Mlp & Energy Fund

Kurv Yield Premium Strategy Netflix NFLX ETF

Kurv Yield Premium Strategy Tesla TSLA ETF

Xtrackers USD High Yield BB-B ex Financials ETF

FT Cboe Vest US Equity Moderate Buffer ETF - October

FT Cboe Vest US Equity Enhance & Moderate Buffer ETF - October

While the ETF industry didn't see over-the-top activity, the past week was fairly busy, with 11 new ETFs making their debut and six ETFs shutting down. Among the launches were two covered call funds from Goldman Sachs and a new fund from YieldMax that offers a covered call strategy tied to the stock of Moderna.

This Week in ETFs: 4 New Single-Stock Funds Debut

News for Rayliant Quantamental Emerging Market Equity ETF ETF (RAYE)