The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Tema Global Royalties ETF to a Morningstar Medalist Rating of Negative.  The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 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 an Average Process Pillar rating.  Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. To be considered a quality steward, this strategy's parent organization needs to improve factors like insignificant personal investments from portfolio managers and portfolio managers with limited tenures at the firm. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

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Franco-Nevada C

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. Tema Global Royalties ETF earns an Average Process Pillar rating. 

The main contributor to the rating is the firm's five-year retention rate of 100% over the period. The fund's concentrated portfolio, with its top 10 holdings accounting for 50% of assets, supports the rating. High-conviction picks court the risk of blowing up, but can also drive outperformance. Lastly, the process is limited by high costs across its parent firm's funds, whose fees rank in their category's most-expensive quintile on average. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep expenses low.

 This strategy skews toward smaller, higher-growth companies compared with its average peer in the Natural Resources Morningstar Category. Examining additional factor exposure, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy also has had a defensive tilt, with exposure to higher-quality stocks compared with peers in recent years. This means that the fund holds companies that are profitable, growing, and have solid balance sheets. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it endure downturns better than Morningstar Category peers. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. Additionally, this strategy has exhibited a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. In recent months, the strategy also had less Volatility factor exposure than 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 healthcare and communication services relative to the category average by 9.4 and 9.1 percentage points, respectively. The sectors with low exposure compared to category peers are basic materials and industrials, underweight the average by 13.5 and 6.6 percentage points of assets, respectively. The portfolio is composed of 29 holdings and is quite concentrated. More concretely, 50.3% of the strategy's assets are housed within the top 10 holdings, compared to the category average of 25.3%.

Average

Process

Tema Global Royalties ETF earns a Below Average People Pillar rating. The team benefits from the firm's five-year retention rate of 100%. However, the rating is limited by the number of months that the management team has been running this vehicle together. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy. 


None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

Below Average

People

Due to Tema Global's short track record as a firm, 10 months, there has not been time to demonstrate whether it has a unique value proposition over peer asset managers. This earns the firm a Below Average Parent Pillar rating. The firm currently manages 76 vehicles, with a total of $125.7 million under management across a bench of eight portfolio managers.  The firm's earliest portfolio manager hire, Christopher F. Semenuk, has more than 20 years of industry experience. 
 
   

 As Tema Global builds and continues to develop a track record, its rating will be adjusted accordingly.

Parent

Tema Global Royalties ETF

ROYA is an actively managed ETF that invests in stocks of companies that derive their revenue from royalties and intellectual property income. The fund uses a bottom-up approach to select pioneering companies at perceived attractive valuations.

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The U.S. ETF industry saw a major slowdown in ETF launches during the week ending Aug. 18 as the summer slump continued. Only six new ETFs launched, while issuers announced only one new closure.

This Week in ETFs: 2 New Funds Launch From Tema

NEW YORK--(BUSINESS WIRE)--Tema ETFs (“Tema”) launches two innovative and actively managed thematic ETF offerings: the Oncology ETF (CANC) and the Global Royalties ETF (ROYA). These strategies are the first to address these specific themes in an actively managed ETF wrapper in the United States. The CANC portfolio will be managed by David K. Song, MD, PhD, CFA, who has led biotechnology and healthcare investment teams throughout his extensive 25-year career, including roles at Rockefeller Capit.

News for Tema Global Royalties ETF ETF (ROYA)