A strong management team and sound investment process underpin Main Sector Rotation ETF's Morningstar Medalist Rating of Bronze. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy's managers invest alongside shareholders, which helps it earn an Above Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including low portfolio manager turnover and a bench of long-tenured portfolio managers.

Analyst Rating

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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. Main Sector Rotation ETF earns an Above Average Process Pillar rating. 

The main driver of the rating is the firm's five-year retention rate of 100% over the period. The size of the portfolio management team also reinforces the process. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy prefers smaller market-cap companies compared with the average fund in its peer group, the Large Blend Morningstar Category.  But in terms of investment style, it is on par with peers. Examining additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This contributes to a higher-risk, higher-reward approach. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. In recent months, the strategy also had less Quality 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 communication services and technology relative to the category average by 8.1 and 5.5 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and consumer defensive, underweight the average by 5.2 and 4.4 percentage points of assets, respectively. The portfolio is positioned across 17 holdings and is relatively top-heavy. Of the strategy's assets, 89.1% are concentrated within the top 10 holdings, compared to the category’s 49.5% average. 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.

Above Average

Process

Main Sector Rotation ETF earns an Above Average People Pillar rating. The main contributor to the rating is the firm's five-year retention rate of 100%. The size of the portfolio management team also bolsters the rating. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the rating is limited by the parent firm's five-year success ratio of 0%. 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 modest success ratio suggests that the firm could do better across its fund lineup.


Kim D. Arthur, the longest-tenured manager on the strategy, boasts 22 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 compared to category peers. With at least one manager investing $1 million or more in this offering, investors can have some assurance that the team's interests are aligned with theirs.

People

Main Management's track record as a steward is mixed, leading to an Average Parent Pillar rating. Portfolio management turnover has been minimal at the firm over the past five years. Long-term stability signals a strong investment culture. A sign of strength at Main Management is its longest-tenured management, which boasts 15 years of average asset-weighted tenure at the firm. This wealth of experience builds confidence that the group can navigate a variety of market environments adeptly. Looking at the firm's risk-adjusted performance, its fund lineup compares similarly to competitors. Across its open-end and exchange-traded funds, the firm's average five-year Morningstar Rating is 3.0 stars.

Average

Parent

Main Sector Rotation ETF

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News for Main Sector Rotation ETF ETF (SECT)