VanEck Semiconductor ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

NVIDIA

Broadcom

QUALCOMM

Texas Instruments

Micron Technology

Applied Materials

Lam Research

Advanced Micro Devices

Analog Devices

KLA-Tencor

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. VanEck Semiconductor ETF earns an Above Average Process Pillar rating. The main 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. Excellent risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to replicate as closely as possible, before fees and expenses, and the price and yield performance of the MVIS® US Listed Semiconductor 25 Index.  The fund normally invests at least 80% of its total assets in securities that comprise the fund's benchmark index. The index includes common stocks and depositary receipts of U.S. exchange-listed companies in the semiconductor industry. Such companies may include medium-capitalization companies and foreign companies that are listed on a U.S. exchange. The fund is non-diversified. 

 The portfolio is overweight in technology by 21.2 percentage points in terms of assets compared with the category average, and its energy allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 9.5 and 4.4 percentage points of assets, respectively. The strategy owns 25 securities and is quite concentrated. In particular, 72.0% of the portfolio's assets are housed within the top 10 holdings, versus the category’s 52.4% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 18% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

VanEck’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There are two managers listed on the fund: Griffin Driscoll, Peter Liao. Together, they manage a total of 15 strategies, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

VanEck’s ownership structure and specialization make it unique among industry peers. The firm’s founding family and namesake still have control, and its product lineup still reflects its legacy as a specialist in niche market segments. VanEck earns an Average Parent Pillar rating. 

Founded by John van Eck in 1955, the firm staked its claim in the industry by capitalizing on burgeoning markets. Starting with the opening of Western Europe to U.S.-based investors in the wake of the Marshall Plan, VanEck’s largest and most successful products provide exposure to areas of the market that are off the beaten path, such as hard assets, emerging-markets debt, and below-investment-grade-rated corporate debt.

Through its history, VanEck has taken an opportunistic approach to product development. For instance, since 2018, VanEck has launched strategies that provide exposures ranging from international REITs to companies involved in video game development. Regardless of where their reach takes them, however, VanEck builds a case that the strategy will be relevant over the long term and that its risks must be easy to understand. However, not all its products catch on, and the firm has shuttered several offerings in the last decade. 

VanEck remains a privately held firm, wholly owned by CEO Jan van Eck and his family. Although this enables the firm to focus on the long term and the firm offers some employees participation in profits, the firm hasn’t used equity as a recruiting and retention tool and introduces some key-person risk in the executive suite.

Parent

VanEck Vectors Semiconductor ETF

SMH tracks a market-cap-weighted index of 25 of the largest US-listed semiconductors companies.

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