Weakness in Bahl & Gaynor Sm/Md Cp Inc Gr ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Low People Pillar. The strategy gets a Below Average Process Pillar rating.  A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. Although this strategy's parent firm still has a way to go to be a high-quality steward, it has bright spots like significant personal investments from managers but could focus on a below-average success ratio across its lineup. As a result, the firm obtains a Below Average Parent Pillar.

Analyst Rating

Booz Allen Hamilton Hld

Hubbell

Victory Capital Holdings

Broadridge Financial

Watsco

Snap-on

Amdocs

Targa Resources

Hartford Financial Services Group

Quest Diagnostics

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. Bahl & Gaynor Sm/Md Cp Inc Gr ETF earns a Below Average Process Pillar rating. 

The process benefits from its level of diversification across individual securities, with its top 10 holdings accounting for 39% of assets. However, the rating is limited by the parent firm's five-year risk-adjusted success ratio of 33%. 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 relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 71% also holds the process back.

 This strategy skews toward larger, higher-growth companies compared with its average peer in the Small Value Morningstar Category. Examining additional factor exposure, this strategy has consistently favored high-quality stocks, including those with low financial leverage and solid returns on equity, compared with Morningstar Category peers during recent years. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it weather downturns better than Morningstar Category peers. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. This strategy has also tilted toward low-volatility stocks in recent years, meaning those that have a lower standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield factor over 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 technology and utilities relative to the category average by 4.7 and 4.7 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and consumer cyclical, underweight the average by 4.5 and 3.7 percentage points of assets, respectively. The strategy owns 50 securities and is relatively top-heavy. Of the strategy's assets, 39.2% are concentrated within the top 10 holdings, compared to the category’s 28.9% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 19% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Bahl & Gaynor Sm/Md Cp Inc Gr ETF earns a Low People Pillar rating. The largest detractor from the rating is the parent firm's five-year success ratio of 33%. 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 subpar success ratio suggests that the firm could do better across its fund lineup. The combined average five-year excess return of each manager also holds the team back. It suggests that the funds they manage have underperformed their respective category's average return. The size of the portfolio management team weakens the team further, with two portfolio managers at the helm.


Scott D. Rodes, the longest-tenured manager on the strategy, boasts 23 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 1.7 stars, demonstrating disappointing risk-adjusted performance compared with category peers.

People

AAM lags peer asset managers in a number of stewardship qualities, resulting in a Below Average Parent Pillar rating. Aside from the overall view, the firm's portfolio managers have worked to align their interests with investors' by taking a personal stake and investing alongside them. Almost 40% of the firm’s assets are covered by invested managers. AAM fails to showcase longevity across its product shelf, as evidenced by its five-year risk-adjusted success ratio. Over this time period, only 33% of its roster has been able to both survive and beat its respective category median on a risk-adjusted basis. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. 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

Aam Bahl & Gaynor Small/Mid Cap Income Growth ETF

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