The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  Virtus WMC International Dividend ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy receives a Below Average Process Pillar rating, after recently downgrading from Average. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in quality exposure and an underweight in volatility exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Novan

TotalEnergies SE

Autoliv

Banco Santander

Rio Tinto plc Sponsored

BHP Billiton

Manulife Financial

TC Energy

ING Group 6.2 % Perpetual Debt Secs 2003-Without Fixed Called for red.on 16.10.17 at USD 25

Bank of Nova Scotia

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. Virtus WMC International Dividend ETF earns a Below Average Process Pillar rating. 

The process is bolstered by the parent firm's five-year risk-adjusted success ratio of 53%. 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. However, the rating is limited by the fund's weak long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. Management team experience, which averages six years at this fund, also limits the process.

 This strategy has more exposure to the Growth factor than the Foreign Large Value Morningstar Category average. But in terms of market capitalization, it is on par with peers. Analyzing additional factors, this strategy has consistently had a defensive tilt owing to its exposure to high-quality stocks over the past few years. Such holdings could cause it to trail peers during economic booms, but help it better endure busts. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy has constantly held more illiquid stocks, evidenced by holdings' low trading volume, resulting in higher liquidity risk exposure than peers. 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 recent months, the strategy also had less Liquidity 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 financial services and communication services relative to the category average by 4.8 and 3.3 percentage points, respectively. The sectors with low exposure compared to category peers are technology and industrials, underweight the average by 3.9 and 3.4 percentage points of assets, respectively. The portfolio is composed of 128 holdings and is quite concentrated. More concretely, 21.8% of the fund’s assets are housed within the top 10 holdings, compared to the category average of 14.4%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 61% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

Virtus WMC International Dividend ETF earns an Average People Pillar rating. Thomas S. Simon brings eight years of listed portfolio management experience to the team. The average Morningstar Rating of the strategies they currently manage is 2.7 stars, indicating that their risk-adjusted returns have fallen below the category average. Thomas S. Simon draws on only one other listed manager. Together, they are adequately equipped with six years of average listed portfolio management experience. As a team, they manage four investment vehicles together, with a Neutral asset-weighted average Morningstar Medalist Rating, indicating the team will struggle to deliver positive alpha in aggregate. The highest personal investment by either manager is between $10,000 and $50,000. That is too low to promote alignment of their interests with the fund's investors. 

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

As Virtus Investment Partners evolves its investment affiliate roster and fund lineup, it retains an Average Parent rating.
The publicly traded firm uses a multimanager approach. It fully owns all but one of its 14 affiliated asset managers and also uses subadvisors. Since 2020, it purchased six affiliates, expanding its alternative offerings through its 2021 Westchester Capital Management acquisition and its 2023 purchase of AlphaSimplex. In 2022, Virtus combined its three fixed-income affiliates—Newfleet, Stone Harbor, and Seix—into one legal entity, Virtus Fixed Income Affiliates, though each affiliate maintains its brand and continues to manage money independently.
Virtus has also made some changes to its investment lineup. Voya became a meaningful subadvisor for Virtus, after Voya bought the US business from Allianz Global Investors, which was banned by the SEC from running registered funds in the US for 10 years. Virtus maintained some of the portfolio management teams that moved to Voya but hired affiliates for most of the 17 mandates that AGI ran. More recently, Virtus announced in November 2023 it was moving on from longtime subadvisor Vontobel in favor of affiliate Sustainable Growth Advisors.
Virtus offers distribution and back-office strength, while allowing affiliates investment autonomy. Some managers are strong, such as equity specialist Kayne Anderson Rudnick.

Parent

Virtus WMC International Dividend ETF

VWID is an actively-managed fund of Developed ex-US securities with forecasted above-average dividend yields.

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