TCW Transform Supply Chain ETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy gets an Average Process Pillar. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The management team invests alongside the strategy's shareholders, which helps it earn an Average People Pillar rating. 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

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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. TCW Transform Supply Chain ETF earns an Average Process Pillar rating. 

The main contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 55%. 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 stability of talent across its parent firm also supports the rating. The firm's asset-weighted manager tenure of 23 years demonstrates its ability to retain portfolio managers. Lastly, the process is limited by the experience of the management team, which averages two years at this fund.

 This strategy leans toward smaller, higher-growth companies compared with its average peer in the Large Blend Morningstar Category. Looking at additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to suffer from a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, this strategy has taken on exposure to high-momentum stocks in these years. Momentum strategies wager that market outperformers will continue to outperform, and laggards will continue to lag. Higher exposure to the former could mean the managers are overweighting stocks on winning streaks. In this month, the strategy also had more exposure to the Momentum factor over 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 basic materials relative to the category average by 54.5 and 10.0 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and consumer cyclical, underweight the average by 13.5 and 10.2 percentage points of assets, respectively. The portfolio is positioned across 25 holdings and is quite concentrated. In particular, 61.7% of the portfolio's assets are housed within the top 10 holdings, compared to the typical peer's 49.5%. And in closing, in terms of portfolio turnover, this fund trades more frequently than its average peer, potentially racking up additional expenses for investors and creating a drag on performance.

Average

Process

TCW Transform Supply Chain ETF earns an Average People Pillar rating. The leading driver of the rating is its parent firm's five-year success ratio of 55%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The stability of talent across its parent firm also contributes to the rating. The firm's asset-weighted manager tenure of 23 years demonstrates its ability to retain portfolio managers. Lastly, the rating is limited by the experience of the management team, which averages two years at this fund.


The highest personal investment in the fund by any of its managers is between $100,000 and $500,000. That's on the low side--it would need to be more than $1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors.

People

TCW enters 2023 with a new CEO and the potential for big changes across its franchise, underpinning an Average Parent rating.
Katie Koch stepped into the CEO role in early 2023 following the retirement of David Lippman, who had been in that seat since TCW management and The Carlyle Group partnered to buy the firm from Société Générale in 2013. Koch joined from Goldman Sachs, where she spent 20 years and most recently was CIO of Goldman's $300 billion public equity business. While TCW's decision to hire an outsider with an equity background was a surprise, it's clear that Koch was chosen for her vision for the firm and experience at running an investment business. It's unlikely that there will be major changes to the investment teams, especially the standout fixed-income group that oversees roughly 90% of the firm's $205 billion in assets.
Carlyle owns 31% of TCW, while employees own 44%. The remaining 25% is owned by Nippon Life, which entered the picture in 2017 when it bought its stake from Carlyle. The two outside owners have been largely hands-off and, except for a brief foray into liquid alternatives, TCW has hewed close to its core competencies. The ownership structure has been at a standstill since 2017, though going forward there is the potential for change to that makeup, which brings its own attendant risks and opportunities.

Parent

Engine No 1 Transform Supply Chain ETF

SUPP is an actively managed, high-conviction portfolio of US equities that are considered to be driving and benefiting from the supply chain transformation. Stocks selected can be from any economic sector but generally are those relocalizing their supply chain, automation & innovation, and transportation.

On this episode of the “ETF of the Week” podcast, VettaFi's Head of Research Todd Rosenbluth discussed the TCW Transform Supply Chain ETF (SUPP) with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.

VIDEO: ETF of the Week: TCW Transform Supply Chain ETF (SUPP)

VettaFi's Head of Research Todd Rosenbluth discussed the TCW Transform Supply Chain ETF (SUPP) on this week's “ETF of the Week” podcast with Chuck Jaffe of “Money Life.” For more news, information, and analysis, visit VettaFi | ETF Trends.

ETF of the Week: TCW Transform Supply Chain ETF (SUPP)

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SAN FRANCISCO--(BUSINESS WIRE)--Engine No. 1, an alternative asset manager that provides capital and operational expertise to industries undergoing fundamental transition, today announced the close of the sale of its Transform ETF platform to The TCW Group. “The closing of the sale of our ETF platform to TCW marks the successful evolution of a business we launched and rapidly developed to become a leader in the active thematic space,” said Chris James, Engine No. 1 Founder and Chief Investment.

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News for Engine No 1 Transform Supply Chain ETF ETF (SUPP)