SRH REIT Covered Call ETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and an 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 earns an Average People Pillar rating. Management team members could invest more of their own money in the fund. The strategy's parent organization is industry standard, albeit with some strong attributes like overall attractive fees and continuity among portfolio managers. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Equinix

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American Tower

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Vail Resorts

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Host Hotels & Resorts

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. SRH REIT Covered Call ETF 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 bolsters the rating. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy, over time, has opted for smaller market-cap companies, compared with others in the Real Estate 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. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. 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 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. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. 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 has allocations in its top two sectors, consumer cyclical and healthcare, that are similar to the category. The sectors with low exposure compared to category peers are real estate and financial services; however, the allocations are similar to the category. The portfolio is composed of 28 holdings and is about as top-heavy as the category average, with 60.2% of assets in the top 10 holdings.

Average

Process

SRH REIT Covered Call ETF earns an Average People Pillar rating. The primary contributor to the rating is the firm's five-year retention rate of 100%. A reasonable expense ratio also bolsters the People rating, with fees ranking in its category's middle quintile. Lastly, the rating is limited by the number of months that the management team has been running this vehicle together. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.


The team is backed by Rafael Zayas, the longest-tenured manager on the strategy, who provides 16 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, reflecting below-average risk-adjusted performance relative to category peers. Rafael Zayas has an adequate backdrop of support, drawing on three additional listed managers, averaging nine years of listed portfolio management experience. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

People

Since its inception one year ago, SRH Funds has demonstrated that it will hold its own as a steward of capital, warranting an Average Parent Pillar rating. SRH Funds currently runs two vehicles, with a total of $192.7 million under management and a bench of four fund managers.   

 The below-average fees of SRH Funds's open-end and exchange-traded funds display a commitment to maximizing investor returns. The average net expense ratio for its funds ranks within the lowest quintile of peer asset managers.  

 To keep an Average rating, SRH Funds needs to uphold a consistent track record of positive investor experience.

Parent

SRH REIT Covered Call ETF

SRHR is an actively managed portfolio of publicly traded US REITs, combined with a covered call writing strategy. The funds objective focuses on pursuing total return.

SRH Funds has launched the SRH REIT Covered Call ETF (NYSE Arca: SRHR). The actively managed ETF targets a portfolio of publicly traded REITs with long-term capital appreciation and annual distribution growth.

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