The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Fairlead Tactical Sector to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The team managing 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 underweight position in the Europe-Developed region and has an overweight in developed markets regions compared with category peers. 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 overall attractive fees and high portfolio management retention.

Analyst Rating

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Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Fairlead Tactical Sector Fund earns an Average Process Pillar rating. The primary contributor to the rating is the firm's five-year retention rate of 100% over the period. Low expenses across its parent firm's funds, whose fees, on average, rank in the cheapest quintile of their respective category, also influence the rating. The pattern of low fees at the firm suggests that it is focused on delivering strong results for investors. Lastly, the process is limited by the experience of the management team, which averages two years at this fund.

 Its equity holdings are not differentiated in terms of size and value-growth exposure versus category peers. The strategy has three region or sector biases compared to category peers. The most meaningful is its consistent underweight in the Developed Europe region. It also routinely positions more assets in developed markets regions. Lastly, the portfolio has maintained an underweight position in the healthcare sector. 

 The portfolio is overweight in real estate and basic materials relative to the category average by 9.1 and 7.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer defensive, underweight the average by 12.4 and 5.7 percentage points of assets, respectively. The portfolio is overweight in North America by 16.8 percentage points compared with the category average, and Emerging Europe's allocation is similar to its peers. The regions with low exposure compared to their category peers are Developed Europe and Japan, underweight the average by 6.5 percentage points and 2.7 percentage points, respectively.

 The fund’s fixed-income sleeve has less credit and interest rate risk than the average category peer. Specifically, the strategy has an average credit rating of AA versus the category average’s A and has a shorter average duration of 1.9 years versus the category average of 4.1 years.

Average

Process

Fairlead Tactical Sector Fund earns a Below Average People Pillar rating. The team is strengthened by the firm's five-year retention rate of 100%. However, the rating is held back by the experience of the management team, which averages two years at this fund. 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.

Below Average

People

Since its inception only two years ago, Fairlead Funds has demonstrated that it can be trusted as much as the next asset manager. As a result, it has an Average Parent Pillar rating. Fairlead Funds currently manages one vehicle and one portfolio manager. The firm's solo manager is relatively inexperienced, with only two years of industry experience.  

 A pocket of strength is the firm’s economical fees on its open-end and exchange-traded funds, demonstrating a firmwide commitment to minimizing costs and maximizing investors’ returns. The average net expense ratio of its funds is within the lowest quintile of firms.  

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

Parent

Fairlead Tactical Sector Fund

TACK relies on a proprietary, technical model to actively manage a US large-cap sector rotation strategy. During periods deemed risk-off, the fund toggles the exposure to short- or long-term US Treasurys or gold. The objective is to outperform the S&P 500.

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