Weakness in Intelligent Real Estate ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy receives a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and an underweight in momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. 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 firm has some investor-friendly attributes, like overall reasonable fees, but it is held back by discontinuity among portfolio managers. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

Physicians Realty

Essex Property Trust

Piedmont Office Realty Trust

American Assets

W. P. Carey

Cousins Properties

Extra Space Storage

Realty Income Corp

Boston Properties

Federal Realty Investment Trust

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. Intelligent Real Estate ETF earns a Low Process Pillar rating. 

The most substantial detractor from the rating is the parent firm's five-year retention rate of 60%, which suggests it could do more to retain 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. The number of months that the management team has been running this vehicle together limits the rating further.

 This strategy, over time, has preferred smaller market-cap companies, compared with others in the Real Estate Morningstar Category.  But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Examining 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 are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has had lower exposure to momentum stocks over peers in recent 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. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. 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. Such holdings could cause it to trail peers during economic booms, but help it better endure busts. Nevertheless, the fund's Quality exposure was in line with peers in the latest month. 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 real estate by 3.5 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and financial services; however, the allocations are similar to the category. The portfolio is positioned across 42 holdings and its assets are more dispersed than peers in the category. In particular, 30.1% of the portfolio's assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 61.5%. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.

Process

Intelligent Real Estate ETF earns a Below Average People Pillar rating. The team benefits from the strategy's costs, which rank in its category's least costly fifth. Fees detract from net returns, so the managers have a lower expense hurdle to overcome. However, the rating is limited by the combined average five-year excess return of each manager, which suggests that the funds they manage have lagged their respective category average. The number of months that the management team has been running this vehicle together also holds the rating back. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.


The team is backed by Michael J. Venuto, the longest-tenured manager on the strategy, who provides 11 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.5 stars, reflecting below-average risk-adjusted performance relative to category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 15 years of listed portfolio management experience.

Below Average

People

Even though Armada only has a two-year track record, it has shown to be an industry-standard steward, warranting an Average Parent Pillar rating. Armada currently manages two vehicles, with a total of $5.7 million under management and a bench of three fund managers. Despite Armada having a relatively short track record, its managers are seasoned--with an average of 15 years of total industry experience.  

 Armada deserves plaudits for its commitment to low fees for its open-end and exchange-traded funds, which showcases its willingness to prioritize investors. The firm's average net expense ratio across all funds is in the lowest quintile of firms.  

 To maintain an Average rating, Armada will be expected to maintain a consistent track record of positive investor experience.

Average

Parent

Tidal ETF Trust Intelligent Real Estate ETF

REAI is an actively managed fund that invests primarily in US-listed commercial REITs that provide qualitative characteristics of a portfolio of public, non-traded REITs. The fund also invests, to a lesser extent, in mortgage-backed securities.

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