Royce Quant Small-Cap Quality Value ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy benefits from a notable effort from managers to align personal interests with shareholders by investing alongside them. This helps drive the team's Average People Pillar rating. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable overweight position in quality exposure and volatility exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

CVR Energy

Andersons

Encore Wire

New York Community Bancorp

DXC Technology

Xerox

Bread Financial Holdings Inc

Arch Resources

Peabody Energy

Cal-Maine Foods

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. Royce Quant Small-Cap Quality Value ETF earns an Average Process Pillar rating. 

The primary contributor to the rating is the stability of the management team. Specifically, the fund has not seen a manager change in the last seven years. Respectable risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 37%. 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. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy targets smaller plays than its peers’ average in the Small Value Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Looking at additional factor exposure, this strategy has consistently had a defensive tilt owing to its exposure to high-quality stocks over the past few 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 also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This is a higher-risk, higher-reward approach. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Moreover, this strategy has been underweighting momentum stocks during these years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. In this month, however, the strategy had more exposure to the Momentum factor 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 healthcare and consumer cyclical relative to the category average by 8.3 and 2.6 percentage points, respectively. The sectors with low exposure compared to category peers are real estate and energy, underweight the average by 5.3 and 4.2 percentage points of assets, respectively. The strategy owns 237 securities and its assets are more dispersed than peers in the category. In particular, 10.7% of the fund’s assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 28.1%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 51% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Royce Quant Small-Cap Quality Value ETF earns an Average People Pillar rating. The most important factor influencing the rating is that at least one manager has invested more than $1 million in the strategy, indicating their confidence in the strategy. A low cost, with fees that rank in its category's least expensive fifth, also strengthens the rating. A higher expense ratio reduces net returns, so low costs give this team an advantage. Lastly, the rating is limited by the parent firm's five-year success ratio of 37%. 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 modest success ratio suggests that the firm could do better across its fund lineup.


George Necakov’s veteran status, with over 25 years of listed portfolio management experience, brings a wealth of experience to the table. The strategies they currently manage have an average Morningstar Rating of 3.0 stars, demonstrating average risk-adjusted performance compared with category peers. George Necakov has an experienced listed co-manager. Together, they average 16 years of listed portfolio management experience.

People

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Parent

Legg Mason Small-Cap Quality Value ETF

SQLV is an actively managed fund that uses a multi-factor scoring system to select US small-cap stocks that are weighted based on fundamental composite scores.

SQLV is an actively managed fund that uses a multi-factor scoring system to select US small-cap value stocks that are weighted based on fundamental composite scores.

Invesco S&P SmallCap 600 Pure Value ETF

ProShares Russell 2000 Dividend Growers ETF

iShares US Small Cap Value Factor ETF

Vanguard Small Cap Value ETF

The small-cap index Russell 2000 recently witnessed its most impressive week in over two years as investors bet on the Federal Reserve's halt in its interest rate hike cycle.

7 Factors Why Small-Cap Value ETFs May Rise Ahead

SQLV has been managed actively since May 2022; the strategy is small-cap universe-centered, with value and quality screens mindful of FCF and ROIC. A strong value and quality mix is under the hood, manifested in a high earnings yield, remarkable ROE, and significant presence of players with strong earnings quality. Performance is not as robust as it might be though.

SQLV: Strong Factor Mix Overshadowed By Liquidity Nuances

Avantis US Small Cap Equity ETF

WisdomTree U.S. SmallCap Earnings Fund

Invesco S&P SmallCap Value with Momentum ETF

Small-cap stocks and ETFs have been gaining strength lately on the signing of the debt deal, upbeat U.S. jobs data and chances of no rate hike this week.

4 Reasons to Bet on Small-Caps ETFs

Royce Value Trust

The Royce Value Trust CEF invests in value-oriented stocks of small-cap and micro-cap companies. The fund benchmarks the performance of its portfolio against the Russell 2000 Index. The Royce Quant Small-Cap Quality Value ETF is under the Legg Mason ETF Investment Trust. The fund also benchmarks the performance of its portfolio against the Russell 2000 Index.

RVT Vs. SQLV: Competing Royce Small-Cap Value Funds

SPDR Gold Trust

AdvisorShares Peritus High Yield ETF

Aberdeen Standard Physical Platinum Shares ETF

Materials Select Sector SPDR Fund

The broader market kicked off 2023 on a moderate note. These ETFs can be good picks for the month January.

ETFs to Buy for January

Pacer US Small Cap Cash Cows 100 ETF

The small-cap index is now at its cheapest versus the large-cap Russell 1000 since March 2020. according to Jefferies data, as quoted on Reuters.

Small-Cap ETFs: Value Play or Value Trap?

iPath Pure Beta Crude Oil ETN

WisdomTree Bloomberg Floating Rate Treasury Fund

iPath S&P 500 VIX Short-Term Futures ETN Class A

Launches continued at a steady pace, but there were very few other goings-on in the ETF space.

ETF Odds & Ends: Avantis Debuts ESG ETFs

Avantis U.S. Small Cap Value ETF

First Trust Small Cap Growth AlphaDEX Fund

First Trust Small Cap Value AlphaDEX Fund

iShares Morningstar Small-Cap Growth ETF

iShares Morningstar Small-Cap Value ETF

iShares Russell 2000 Value ETF

iShares Russell 2000 Growth ETF

Janus Henderson Small Cap Growth Alpha ETF

MFAM Small-Cap Growth ETF

Opus Small Cap Value ETF

RENN Fund

FlexShares Morningstar US Market Factor Tilt Index Fund

USAA MSCI USA Small Cap Value Momentum Blend Index ETF

Vanguard Small-Cap Growth

SPDR S&P 1500 Value Tilt ETF

Vgd Rsl2000 Grw Shs

Vanguard Russell 2000 Value ETF

Data on the rotation between small-cap growth and value stocks goes back decades. Looking back over 40 years, small value beat small growth about two-thirds of the time.

The One Chart That May Surprise You About Small-Cap Stocks

Getting small cap exposure is a must nowadays, but sifting through the Russell 2000 to find a mix of quality and value is not an efficient way to do things. The Legg Mason Small-Cap Quality Value ETF (SQLV) does it all in a single fund.

Need a Quality Small Cap ETF with a Touch of Value?

VanEck Vectors Gaming ETF

iShares Transportation Average ETF

Invesco S&P SmallCap Industrials ETF

Invesco S&P SmallCap Materials ETF

Given the great rotation, some ETFs, which were depressed this year, have showed strong performance last week.

5 ETFs At the Forefront of the Great Rotation

Invesco S&P SmallCap Energy ETF

Given the improvements in domestic economy, small-cap stocks led the way higher last week.

News for Legg Mason Small-Cap Quality Value ETF ETF (SQLV)