Despite People Pillar weakness and an Average Process Pillar, ProShares Nanotechnology ETF gets enough right to retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy receives 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 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 team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like overall attractive fees and a favorable lineup success ratio. This earns the firm an Average Parent Pillar rating.

Analyst Rating

NVIDIA

Onto Innovation

Lam Research

ASML Hld

Applied Materials

Entegris

KLA-Tencor

Tower Semiconductor

Bruker

Agilent Technologies

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. ProShares Nanotechnology ETF earns an Average Process Pillar rating. The leading factor in the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Management team experience, which averages 17 years at this fund, also contributes to the process. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 38%. 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 modest success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results, before fees and expenses, that track the performance of the Solactive Nanotechnology Index (the “index”).  The index consists of companies focused on making or applying nanotechnology innovations that allow for improved products, processes, or techniques through control or measurement of material at nanoscale. The adviser seeks to remain fully invested at all times in securities and/or financial instruments that, in combination, provide exposure to the returns of the index without regard to market conditions, and trends or direction. The fund is non-diversified. 

 The portfolio is overweight in healthcare and basic materials relative to the category average by 7.9 and 6.6 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 9.4 and 4.4 percentage points of assets, respectively. The portfolio is composed of 35 holdings and is similarly diversified as peers, with 51.2% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, on a year-over-year basis, 42% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

ProShares’s team earns a Below Average People Pillar rating. The team benefits from the fund's structure. It tracks an index, which is helpful because historical data, like Morningstar's Active/Passive Barometer, shows that index funds have generally outperformed their active counterparts, especially over longer time periods. However, the rating is held back by the parent firm's five-year success ratio of 32%. 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 subpar success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 58% also limits the team.

Below Average

People

In a competitive industry, ProShares doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One notable advantage of ProShares is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the second-cheapest quintile of category peers. The firm’s lineup has demonstrated industry-average durability. Its 10-year success ratio is 57%, meaning that 57% of strategies have both survived and beaten their respective category median. A firm's success ratio indicates relative performance and provides insight into a firm’s discipline around investment strategy and product development. ProShares has faced above-average manager turnover in the past five years. This is a concern, as long-term stability tends to support positive results.

Parent

ProShares Nanotechnology ETF

TINY tracks a market-cap-weighted index of 30 securities from developed markets involved in nanoscale technology.

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