Weakness in ATAC US Rotation 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 receives a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in the Europe-Developed region and an overweight in developed markets regions compared with category peers. The longest-tenured manager has a wealth of experience, but other weaknesses limit it to a Below Average People Pillar rating. To be considered a quality steward, this strategy's parent organization needs to improve factors like a bench of relatively inexperienced portfolio managers and low portfolio manager retention. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

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Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. ATAC US Rotation ETF earns a Low Process Pillar rating. The most meaningful 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 modest success ratio suggests that the firm could do better across its fund lineup. High costs across its parent firm's funds, whose fees rank in their respective category's costliest quintile on average, also hold the process back. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep fees low. The parent firm's five-year retention rate of 67% weakens the process further.

This strategy is more dominantly invested in equity and fixed-income asset classes than the typical Tactical Allocation category peer, with a 97% to 99% equity to fixed-income breakdown, versus the average's 46% to 33%. Its equity sleeve is consistently tilted toward both smaller market-cap and growth-oriented companies compared with the category average. The strategy has three region or sector biases compared to category peers. The most notable is its consistent underexposure to the Developed Europe region. It also routinely positions more assets in developed markets regions. Lastly, the strategy has a large and consistent overweight in the communication services sector. 

 The portfolio is overweight in technology by 11.3 percentage points in terms of assets compared with the category average, and its communication services allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and consumer defensive, underweight the average by 4.9 and 3.4 percentage points of assets, respectively. The portfolio is overweight in North America by 17.7 percentage points compared with the category average, and Emerging Europe's allocation is similar to its peers. The regions with low exposure compared to their category peers are Developed Europe and Japan, underweight the average by 7.2 percentage points and 2.7 percentage points, respectively.

 For the strategy's fixed-income sleeve, interest rate risk is relatively high compared with the typical category peer, though credit risk is lower. More concretely, the fund’s average credit rating is AA compared with the category average’s BB but possesses a longer average duration of 18.0 years as opposed to the category average's 4.6 years.

Process

ATAC US Rotation ETF earns a Below Average People Pillar rating. The rating is held back by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns. The parent firm's five-year success ratio of 0% also weakens 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 relatively low success ratio suggests that the firm could do better across its fund lineup.


Michael Gayed, the longest-tenured manager on the strategy, boasts 13 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 1.0 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Michael Gayed has an experienced listed co-manager. Together, they average 12 years of listed portfolio management experience.

Below Average

People

ATAC fails to meet industry-standard stewardship qualities, culminating in a Below Average Parent Pillar rating. With an average tenure of six years among the longest-tenured managers at ATAC, the firm is on par with peers. Seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions. A detractor from the firm's rating is its lower-than-average portfolio management retention over the past five years, as elevated turnover bears watching. The firm charges fees on its open-end and exchange-traded funds that are on par with category peers. On average, fees on its funds are within the middle quintile, giving it neither an advantage nor disadvantage compared with the competition.

Parent

ATAC US Rotation ETF

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