IQ CBRE NextGen Real Estate ETF earns a Morningstar Medalist Rating of Negative with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy receives a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and 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. The team managing the passive product drives the strategy's Above Average People Pillar rating, following a recent upgrade from Average. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Welltower

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Equity Residential

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. IQ CBRE NextGen Real Estate ETF earns a Below Average Process Pillar rating. The process is strengthened by the firm's five-year retention rate of 87% over the period. However, the rating is held back by the fund's weak long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's disappointing risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.8 stars, also holds the process back. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that correspond generally to the price and yield performance of the IQ CBRE NextGen Real Estate Index.  The index is a rules-based, modified capitalization weighted, float adjusted index. The index is designed to provide exposure to real estate sectors and companies that are expected to benefit from large trends affecting property sectors of the global economy over a secular, and multi-year time horizon. The fund generally will invest in all of the securities that comprise its index in proportion to their weightings in the index. The fund invests at least 80% of the value of its assets in securities of real estate issuers. 

 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 strategy owns 99 securities and is diversified among those holdings. In its most recent portfolio, 43.1% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category average's 61.5%. And in closing, in terms of portfolio turnover, this fund trades more frequently than its average peer, potentially racking up additional expenses for investors and creating a drag on performance.

Below Average

Process

New York Life’s team earns an Above Average People Pillar rating. The most important factor affecting the rating is the firm's five-year retention rate of 87%. A low expense ratio also strengthens the rating, with fees ranking in its category's second-cheapest quintile. A higher expense ratio reduces net returns, so low costs give this team an advantage. Lastly, the rating is limited by the parent firm's five-year success ratio of 44%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

Above Average

People

New York Life Investments' collection of autonomous investment boutiques will have a new leader in May 2023, and it will take time to assess his impact. The firm keeps its Average Parent rating.
New York Life, the insurance giant that owns NYL Investments, tapped Naïm Abou-Jaoudé to be the asset manager's CEO after the previous CEO departed. Abou-Jaoudé inherits a firm that has grown by building internally and through acquisition. The firm offers mandates in partnership with 13 different asset managers--eight of which are wholly or partially owned affiliates – through several global outlets. Most U.S. funds fall under the established MainStay brand, whereas IndexIQ oversees a growing lineup of ETFs managed both internally and by other affiliates. Candriam, at which Abou-Jaoudé has been CEO even prior to its 2014 acquisition by NYL Investments, takes the lead in Europe through its own offerings and through those subadvised by other boutiques.
Plenty of these capabilities are compelling, with Candriam and fellow affiliates MacKay Shields and Ausbil sporting standout teams in several wheelhouses. Yet many of the boutiques have also struggled with managing bloated lineups or with improving lagging teams. NYL Investments hasn't shied from changing subadvisors or merging platforms and doesn't have a spotless record of managing capacity or of avoiding trendy offerings.

Average

Parent

IQ US Real Estate Small Cap ETF

ROOF tracks a tier-weighted index of developed market companies classified under real estate sectors that are expected to benefit from trends affecting property sectors in the global economy.

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This article is reprinted by permission from The Escape Home , a newsletter for second homeowners and those who want to be. Subscribe here.

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News for IQ US Real Estate Small Cap ETF ETF (ROOF)