A sound investment process and strong management team underpin Xtrackers S&P ESG Div Arstcrts ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers. The strategy changed its peer group last March, moving from the Large Value category to the Mid-Cap Value Morningstar Category. 

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. 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 with low financial leverage and strong returns on equity. The strategy’s management team earns an Above 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

T. Rowe Price Group

Realty Income Corp

Best Buy

Eversource Energy

Edison

AbbVie

Federal Realty Investment Trust

Kimberly-Clark

Chevron

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. Xtrackers S&P ESG Div Arstcrts ETF earns a High Process Pillar rating. 

The most significant contributor to 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 parent firm's five-year risk-adjusted success ratio of 59% also bolsters the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.2 stars, strengthens the process as well.

 This strategy, over time, has opted for larger market-cap companies, compared with others in the Mid-Cap Value Morningstar Category.  But in terms of investment style, it is on par with peers. Looking at additional factor exposure, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in 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 tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity, during these 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. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a 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 consumer defensive and utilities relative to the category average by 11.8 and 4.9 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and technology, underweight the average by 10.2 and 3.0 percentage points of assets, respectively. The portfolio is composed of 92 holdings and is relatively concentrated. In particular, 21.9% of the fund’s assets are housed within the top 10 holdings, as opposed to the typical peer's 17.7%. And finally, in terms of portfolio turnover, on a year-over-year basis, 29% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Xtrackers’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are four managers listed on the fund: Patrick Dwyer, Shlomo Bassous, Bryan Richards, Ashif Shaikh. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of 29 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.

Above Average

People

In the past two years, DWS has been under heavy scrutiny from the SEC and German authorities owing to greenwashing allegations that were initially raised in August 2021 by the firm’s former chief sustainability officer Desiree Fixler. The SEC announced on Sept. 25, 2023, that it has fined DWS USD 19 million for failing to implement procedures to ensure that all investment staff members were following its environmental, social, and governance policies. This relates to funds where ESG factors were analyzed alongside other financially material factors, but where managers retained discretion over ESG outcomes. In addition, the firm was ordered to pay USD 6 million for deficiencies in its anti-money-laundering processes that were uncovered in a separate investigation. The investigation by the German authorities into the firm's ESG disclosures is still ongoing.  
The SEC findings underline that despite strong senior management commitment, it takes a considerable amount of time and resources to embed sustainability across all levels of an organization for firms without a long-standing sustainability heritage. Overconfidence and failure to deal with internal criticism adequately appear to have contributed to DWS' misleading statements on ESG matters. While it's difficult to quantify the financial damage to clients and no misstatements were detected in financial disclosures or prospectuses, we believe the firm’s shortcomings have the potential to adversely affect investor outcomes. Hence, we welcome DWS' efforts to strengthen governance around ESG integration and communicate more conservatively about its ESG capabilities.
Questionable and unsteady leadership has contributed to the DWS' woes. Previous CEO Asoka Woehrmann, who had spearheaded the firm's ESG push, stepped down in June 2022 as a result of the ESG investigations. His credibility had already been harmed following his use of personal email for business purposes and a large payment made to him by a client when he was head of Deutsche Bank's private-client business before being appointed as DWS' CEO in 2018. His successor Stefan Hoops is the firm's sixth CEO in the past 10 years, highlighting the instability in the firm's top leadership. This appointment also shows the continued influence of its parent company, even after the partial IPO in 2018. Hoops has spent most of his career at Deutsche Bank but has no asset-management background.
Despite all these negative headlines and shaky leadership, DWS has managed to remain quite stable in its investment ranks. The firm has also made strides to gain greater independence. For example, since 2020, bonuses have been linked to the firm's own performance rather than to that of the bank as a whole, which supports alignment and talent retention. Variable remuneration takes into account performance of up to five years.
DWS' vast fund lineup covers all asset classes, including passive strategies, which are offered under the Xtrackers brand. Many offerings don't distinguish themselves, but there are genuine areas of strength among active strategies, and fees are competitive across many funds. While the product development process has been streamlined, and although the firm has launched new strategies at a slower pace, lineup turnover remains a concern as a culture of asset-gathering prevails. New offerings are partly related to an expansion of ESG capabilities, but the firm is also building out its thematic equity, multi-asset, alternatives, and exchange-traded fund range. 
At this stage, we continue to believe that DWS' strengths justify a Parent Pillar rating of Average despite several weaknesses in its stewardship practices, but we will closely monitor the company for further disruption.

Average

Parent

Xtrackers S&P ESG Dividend Aristocrats ETF

SNPD tracks an index of US companies with consistent dividend increases that are screened for certain environmental, social, and governance criteria. The index is weighted based on annual dividend yield.

Xt EAFE Div Yld Shs

Amanda Rebello, head of Xtrackers sales U.S onshore at DWS, told NYSE's Judy Shaw at Exchange 2023 that for investors, income “has been relevant for the last couple of months and continues to be relevant.” “Equities need to work much harder just in light of the extra risk that we're taking,” Rebello said.

NYSE's ETF Leaders: Income and DWS' Amanda Rebello

While the S&P 500 is up 5% year-to-date, the index lost more than 18% in 2022. And even though inflation has come down from its 9.1% peak in June, prices are still high, which means that the Federal Reserve will likely continue raising interest rates.

Gain Income from Dividend Stocks With HDEF and SNPD

Xtrackers S&P 500 Growth ESG ETF

Xtrackers S&P ESG Value ETF

Advanced Micro Devices (NASDAQ: AMD) saw its stock rise on Wednesday after posting strong quarterly earnings the day before. The chipmaker beat analyst expectations for sales and profit while forecasting a 10% decline in year-over-year sales for the current quarter.

Strong Earnings From Advanced Micro Devices Should Lift SNPG

When it comes to the Xtrackers S&P ESG Dividend Aristocrats ETF (SNPD), investors may want to focus more on fundamentals and methodology and less on age.

New Dividend ETF Could Be 2023 Star

Democracy International Fund

Freedom 100 Emerging Markets ETF

Harbor Corporate Culture Leaders ETF

JPMorgan Equity Premium Income ETF

KPOP and Korean Entertainment ETF

Schwab US Dividend Equity ETF

Fairlead Tactical Sector Fund

VettaFi Financial Futurist Dave Nadig appeared on Yahoo Finance to discuss the big year for ETFs. “We had over 400 launches this year,” Nadig said, which he thinks could be a record.

Dave Nadig Drills Into the Big Year For ETFs on Yahoo

Vanguard ESG US Stock ETF

Thrivent Small-Mid Cap ESG ETF

Xtrackers MSCI USA ESG Leaders Equity ETF

The ETF launches tap growing investor interest in sustainable investing.

DWS Adds to ESG Lineup With 3 New Funds

Xtrackers S&P 500 ESG ETF

DWS has launched three new exchange traded funds that provide exposure to U.S. equity investment styles with ESG-screened U.S. dividend-, growth-, and value-oriented equities.

DWS Launches 3 New Xtrackers ESG Equity Funds

NEW YORK--(BUSINESS WIRE)--DWS, one of the world's leading asset managers, announced today the listing of three new exchange-traded funds (ETFs) that provide exposure to U.S. equity investment styles with ESG (environmental, social and governance) screened U.S. dividend, growth and value-oriented equities.

News for Xtrackers S&P ESG Dividend Aristocrats ETF ETF (SNPD)