A sound investment process and strong management team underpin SPDR® Portfolio S&P 400 Mid Cap ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy merits a High Process Pillar rating. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People, Process 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

Vistra Energy

Carlisle Companies

Williams-Sonoma

Reliance Steel & Aluminum

GoDaddy

EMCOR Group

Pure Storage

Lennox International

Graco

Owens Corning

The index targets stocks that land between the 85th and 95th percentile of the total U.S. stock market capitalization. Stocks must pass the index committee’s liquidity, size, and profitability screens. The profitability screen requires that the sum of a company’s GAAP earnings over the past four quarters be positive, as well as the most recent quarter. Once the index committee selects stocks, it weights them by market cap. While a committee-based approach lacks transparency, it adds flexibility to reduce unnecessary changes during reconstitution. This has the potential to tame transaction costs more effectively than more-rigid rules-based indexes. 
As the mid-cap space is less defined than its large- and small-cap counterparts, major index providers differ on where to draw the borders, impacting the indexes’ average market capitalization. The S&P 400 MidCap Index tends to go further down the market-cap ladder, favoring small cap stocks  that tend to be more volatile than more established mid-cap stocks. Small-cap companies constitute 19 percentage points more of this portfolio than the average peer.
While market-cap weighting tilts the fund toward its more established stocks, only 18% of the holdings sport Wide or Narrow Morningstar Economic Moat Ratings, compared to 30% for its average peer. That mostly owes to the heavy dose of small-cap stocks, which tend to be less established companies and on shakier financial footing. However, the committee’s profitability requirement limits exposure to unstable but faster-growing stocks. That gives the portfolio a mild value tilt that can be an edge when value stocks rally. The fund’s profitability—proxied by return on invested capital—has been only 1 percentage point lower on average than the average peer over the trailing three years through June 2023 despite its smaller market-cap orientation.
The fund mimics the sector allocation of its average peer, which emphasizes the impact of its cost advantage on category-relative performance over the long run. No sector allocation deviated from the average by more than 5 percentage points as of June 2023. Industrials, consumer cyclicals and technology stocks represent half of the portfolio, reflecting the available opportunities in the mid-cap space. In addition, the fund’s value-growth tilt approximates the average peer, although its higher small-cap exposure pushes it closer to the small-cap border. 
The 400-stock portfolio’s broad reach puts a lid on risk. The fund parks only 6.3% of its assets in the largest 10 holdings, controlling for idiosyncratic risks that can accompany market-cap weighting. In addition, the fund constructs a steady portfolio. Aided by buffers and market-cap weighting, the fund’s 16% turnover ratio in 2022 was 42 percentage points lower than the category average, landing in the best fifth of the category.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.

High

Process

State Street’s equity team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Mark Krivitsky. The team is well equipped, with an average of 19 years of portfolio management experience. Together, they manage a total of six strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential 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

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

SPDR Portfolio Mid Cap ETF

SPMD tracks a market cap-weighted index of mid-cap US companies selected by the S&P Committee.

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