SoFi Next 500 ETF retains its Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's effective investment philosophy supports 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 team managing this passive strategy earns a Below Average People Pillar rating. 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 overall low fees and minimal portfolio manager turnover.

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. SoFi Next 500 ETF earns an Above Average Process Pillar rating. 

The most important driver of the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 100% also contributes to the process. Lastly, the process is limited by the small size of its portfolio management team of one.

 This strategy leans toward smaller, more growth-oriented companies compared with its average peer in the Mid-Cap Blend Morningstar Category. Examining additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over 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 also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. 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. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. 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 energy by 4.0 percentage points in terms of assets compared with the category average, and its technology allocation is similar to the category. The sectors with low exposure compared to category peers are basic materials and financial services; however, the allocations are similar to the category. The portfolio is positioned across 495 holdings and is diversified among those holdings. In its most recent portfolio, 8.9% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category average's 15.4%.

Above Average

Process

Sofi’s team receives 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 managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns. The number of months that the management team has been running this vehicle together also holds the rating back.

Below Average

People

In a competitive industry, Sofi doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One area of strength is the firm’s favorable fees for open-end and exchange-traded funds, demonstrating a firm-wide commitment to minimizing costs and maximizing investors’ returns. Fees for funds are, on average, within the lowest quintile of similarly distributed strategies. Sofi has brought continuity to its product shelf, with low portfolio management turnover compared with peer firms since the firm's inception. With an average three-year Morningstar Rating of 2.0 stars, the risk-adjusted performance of Sofi's open-end and exchange-traded funds falls short of competitors.

Average

Parent

SoFi Next 500 ETF

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