A sound investment process and strong management team underpin Thrivent Small-Mid Cap ESG ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns it an Above Average Process Pillar rating. The management team's large personal investment in the strategy helps it earn an Above Average People Pillar rating. The strategy belongs to a strong firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a favorable lineup success ratio and overall low fees.

Analyst Rating

Modine Manufacturing

Core & Main

Timken

nVent Electric plc

Insight Enterprises

Kyndryl Holdings

Tractor Supply

Sanchez Energy

Bio-Techne

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. Thrivent Small-Mid Cap ESG ETF earns an Above Average Process Pillar rating. 

The predominant contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.6 stars. The parent firm's five-year risk-adjusted success ratio of 63% also influences the rating. 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. Their impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the parent firm's five-year retention rate of 57%, which suggests it could do more to retain its portfolio managers.

 The investment strategy as stated in the fund's prospectus is as follows:

The investment seeks long-term capital growth.  Under normal market conditions, the fund will invest primarily in companies that have market capitalizations within the range of those companies included in widely known small and mid-cap indices, such as the Russell 2500 Index, S&P MidCap 400 Index, S&P SmallCap 600 Index, and or the small- to mid-sized company market capitalization classifications published by Morningstar. 

 The portfolio is overweight in technology by 3.6 percentage points in terms of assets compared with the category average, and its basic materials allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and energy; however, the allocations are similar to the category. The portfolio is positioned across 65 holdings and is relatively top-heavy. Of the strategy's assets, 23.1% are concentrated within the top 10 holdings, as opposed to the category’s 15.4% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 47% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Thrivent Small-Mid Cap ESG ETF earns an Above Average People Pillar rating. The most important driver of the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 3.6 stars. Management team experience, which averages 11 years at this fund, also bolsters the rating. Lastly, the rating is limited by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns.


The management team is invested in the fund, but the maximum investment by any manager is between $100,000 and $500,000. An investment of more than $1 million would be ideal to align managers' interests with those of the fund's investors.

People

Thrivent remains well-positioned in an increasingly competitive industry, earning it an Above Average Parent Pillar rating. A contributing factor to the firm's favorable rating is its impressive track record of endurance. The Thrivent 10-year success ratio is 70%, meaning that over the period, 70% of its products have survived and beaten their respective category median. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. The firm tends to offer open-end and exchange-traded products at lower costs, a strength of the firm. On average, expenses for the firm's funds land in the second-cheapest quintile of category peers. Finally, the Thrivent portfolio management team has lacked continuity over the past five years, denoted by elevated levels of turnover, which bears watching.

Parent

Thrivent Small-Mid Cap ESG ETF

TSME is an actively managed, non-transparent ETF that invests in stocks of global mid- and small-cap companies screened for long-term sustainable business models and ESG commitment. The fund utilizes the Natixis/NYSE non-transparent model.

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News for Thrivent Small-Mid Cap ESG ETF ETF (TSME)