The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Sovereign's Capital Flourish Fund to a Morningstar Medalist Rating of Neutral.  The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Below Average People Pillar. The strategy earns an 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 has a substantial underweight in momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. 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 modest portfolio manager turnover but is held back by relatively short-tenured portfolio managers.

Analyst Rating

BigCommerce Holdings, Inc.

Coca-Cola Bottling

Grand Canyon Education

Euronet Worldwide

Alkami Technology

Goosehead Insurance

Primerica

LCI Industries

Kforce

Diodes

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. Sovereign's Capital Flourish Fund earns an Average Process Pillar rating. 

The most significant contributor to the rating is the firm's five-year retention rate of 100% over the period. The size of the portfolio management team also strengthens the process. With three portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by the experience of the management team, which averages eight years at this fund.

 This strategy, over time, has opted for smaller market-cap companies, compared with others in the Large Blend Morningstar Category.  But in terms of style (value/growth) exposure, it is similar. 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. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. In addition, this strategy has not maintained a defensive tilt, demonstrated by low exposure to the quality factor. This means the fund avoids holding firms that are consistently profitable, growing, and have solid balance sheets. 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 industrials and consumer defensive relative to the category average by 8.0 and 5.8 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 6.5 and 3.6 percentage points of assets, respectively. The strategy owns 81 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 22.6% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 49.5%.

Average

Process

Sovereign's Capital Flourish Fund earns a Below Average People Pillar rating. The team benefits from the fund's structure. It tracks an index, which is helpful because historical data, such as Morningstar's Active/Passive Barometer, finds that index funds have generally outperformed their active counterparts, especially over longer time periods. However, the rating is weakened 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. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.


Rafael Zayas, the longest-tenured manager on the strategy, boasts 16 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.6 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Rafael Zayas draws on only two other listed supporting managers. Although, together they are adequately equipped, with eight years of average listed portfolio management experience.

Below Average

People

Sovereign's Capital's short track record of five months has not stopped it from demonstrating that it can be trusted as much as the next asset manager. As a result, it earns an Average Parent Pillar rating. The firm currently manages one vehicle, with a total of $38.1 million under management across a group of three strategy managers.  The firm's earliest portfolio manager hire, Rafael Zayas, has 16 years of industry experience and has demonstrated skill at the helm of other strategies, which is reassuring. 
 
   

 As Sovereign's Capital builds and continues to develop a track record, its rating will be adjusted accordingly.

Parent

Sovereign's Capital Flourish Fund

SOVF is an actively managed fund that invests in 80 to 100 US companies whose leaders seek to build corporate cultures based on biblical values.

Markets have been gloomier recently, but a new exchange-traded fund (ETF) has some investors seeing the light.

Divine Market Intervention? ‘Spiritual ETF' Brings Biblical Competitive Edge

Sovereign's Capital has launched an active ETF targeting companies deemed the issuer considers to be “the most spiritually integrated firms.” The Sovereign's Capital Flourish Fund (NYSE Arca: SOVF), the firm's debut ETF, begins trading on the New York Stock Exchange.

News for Sovereign's Capital Flourish Fund ETF (SOVF)