Weakness in WBI Power Factor® High Dividend ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The team managing the passive strategy earns a Below Average People Pillar. The strategy earns a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable underweight position in momentum exposure and quality exposure compared with category peers. Momentum is the premise that stocks that have recently outperformed will continue to do so. With low momentum exposure, the portfolio is holding stocks that managers believe to be undervalued. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating, the result of a recent upgrade from Below Average. It has displayed a handful of investor-friendly attributes including low portfolio manager turnover but is held back by an unfavorable lineup success ratio.

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. WBI Power Factor® High Dividend ETF earns a Below Average Process Pillar rating. 

The process benefits from tracking an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. However, the rating is limited by the fund's unimpressive 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. The parent firm's five-year risk-adjusted success ratio of 0% also holds the process back. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy tends to hold larger, deeper value companies compared with its average peer in the Mid-Cap Value Morningstar Category. Examining additional factor exposure, this strategy has had relatively low exposure to momentum stocks compared with Morningstar Category peers continually in the last few years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. In the latest month, the strategy was also less exposed to the Momentum factor compared with Morningstar Category peers. This strategy has also tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over peers in recent years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. In this month, the strategy also had more exposure to the Yield factor over 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 energy and financial services relative to the category average by 12.3 and 6.1 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and technology, underweight the average by 15.8 and 8.8 percentage points of assets, respectively. The strategy owns 52 securities and is relatively concentrated. Specifically, 52.2% of the strategy's assets are housed within the top 10 holdings, as opposed to the typical peer's 17.3%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 175% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

WBI’s team receives a Below Average People Pillar rating. The team is bolstered by the stability of the management team. Specifically, the fund has not seen a manager change in the last five years. However, the rating is weakened by the parent firm's five-year success ratio of 0%. The measure indicates the percentage of a firm's funds that survived and outperformed 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 managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns, also holds the team back.

People

In a competitive industry, WBI doesn't differentiate itself enough, leading to an Average Parent Pillar rating. The firm has proven successful at holding onto portfolio management talent, providing continuity for strategies, as displayed by low turnover in the past five years compared with asset management peers. WBI fails to showcase longevity across its product shelf, as evidenced by its three-year risk-adjusted success ratio. Over this time period, only 25% of its roster has been able to both survive and beat its respective category median on a risk-adjusted basis. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. The WBI roster of open-end and exchange-traded funds has had below-average risk-adjusted performance, as evidenced by its average three-year Morningstar Rating of 2.0 stars.

Average

Parent

WBI Power Factor High Dividend ETF

WBIY tracks an index of 50 US firms selected for high forecasted dividend yield and strong fundamental factors. Holdings are weighted by forecasted dividend yield.

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