Weakness in FT Cboe Vest Tech Div Trgt Inc ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and momentum exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' 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 longest-tenured manager has a wealth of experience, but other weaknesses limit it to a Below 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 benchmark on a risk-adjusted basis over the long term. FT Cboe Vest Tech Div Trgt Inc ETF earns a Below Average Process Pillar rating. 

The process is strengthened by low expenses across its parent firm's funds, whose fees rank in their respective category's second-cheapest quintile on average. The pattern of low fees at the firm indicates that it is focused on delivering strong results for investors. However, the rating is limited by the parent firm's five-year risk-adjusted success ratio of 29%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's subpar risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.7 stars, also detracts from the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy leans toward smaller, deeper value companies than its average peer in the Technology Morningstar Category. Examining additional factor exposure, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy has had lower exposure to momentum stocks over peers in recent years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. 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 is overweight in technology and communication services relative to the category average by 6.3 and 5.1 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and industrials, underweight the average by 4.4 and 2.7 percentage points of assets, respectively. The portfolio is positioned across 88 holdings and is quite concentrated. More concretely, 55.0% of the portfolio's assets are housed within the top 10 holdings, versus the category’s 52.4% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 27% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

FT Cboe Vest Tech Div Trgt Inc ETF earns a Below Average People Pillar rating. The team is bolstered by the combined average five-year excess return of each manager, which suggests that the funds they manage have surpassed an average manager. However, the rating is limited by the parent firm's five-year success ratio of 39%. 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 relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 67% also weakens the team.


Howard Rubin’s veteran status, with 24 years of listed portfolio management experience, brings a wealth of experience to the table.  Howard Rubin has an experienced listed co-manager. Together, they average 16 years of listed portfolio management experience. The highest personal investment by either manager is less than $10,000. That is too low to promote alignment of their interests with the fund's investors.

People

First Trust meets the industry standard for stewardship, but it could do more to align itself with investors. It earns an Average Parent rating.

This is a team-oriented organization that eschews star managers. While exchange-traded funds represent the bulk of the firm's assets, First Trust bypasses the competitive market for low-cost beta funds, instead opting for complex strategies with higher management fees. However, the firm's focus on ETFs for future product development underpins its commitment to tax efficiency and transparency. Some of its thematic strategies appear trendy, but it stands behind them and rarely liquidates funds. 

The firm is a private partnership, controlled by Jim Bowen, the CEO. Many senior managers are limited partners. This ownership structure helps the firm stay focused on the long term and promotes retention, which has been strong for the investment team. The firm has grown considerably over the past decade and is among the largest providers of actively managed ETFs, as well as unit investment trusts. As it has grown, the firm has expanded its investment team and beefed up its technology infrastructure.

First Trust's focus is on educating advisors and providing them solutions. This may benefit investors indirectly, but First Trust could do more to directly align with investors by cutting fees and limiting trendy strategies.

Average

Parent

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