A lowering of its Process Pillar rating is the primary driver of AXS Esoterica NextG Economy ETF's downgrade to a Morningstar Medalist Rating of Negative from Neutral. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The strategy's portfolio management team has comparable experience to other strategies in the industry. However, due to other weaknesses, the strategy earns a Below Average People Pillar rating. Although this strategy's parent firm still has a way to go to be a high-quality steward, it has bright spots like significant personal investments from managers but could focus on a bench of limited-tenure portfolio managers. As a result, the firm receives a Below Average Parent Pillar.

Analyst Rating

NVIDIA

Microsoft

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Amazon

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Atlassian

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. AXS Esoterica Nextg Economy ETF earns a Below Average Process Pillar rating. 

The process is bolstered by its parent firm's long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.1 stars. However, the rating is held back by the parent firm's five-year risk-adjusted success ratio of 9%. 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 relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 42% also weakens the process.

 This strategy leans toward larger, more growth-oriented companies compared with its average peer in the Technology Morningstar Category. Looking at additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets.  Lacking this ballast, the fund's prospects will rest on its ability to supersede peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This contributes to a higher-risk, higher-reward approach. In this month, the strategy also had more exposure to the Volatility 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 consumer cyclical and technology relative to the category average by 10.9 and 2.5 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and financial services, underweight the average by 5.2 and 3.0 percentage points of assets, respectively. The portfolio is positioned across 31 holdings and is relatively concentrated. In particular, 66.8% of the fund’s assets are housed within the top 10 holdings, compared with the category’s 48.5% average. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

Below Average

Process

Despite the team's cohort of portfolio managers with industry-standard experience, a relatively inexperienced longest-tenured manager and a number of other weaknesses underpin AXS Esoterica Nextg Economy ETF's Below Average People Pillar rating. Qindong (Bruce) Liu brings three years of portfolio management experience to the table.  They are currently not a named manager on any additional investment vehicles, narrowing their focus to one strategy. The team consists of five additional named managers, who have nine years of average portfolio management experience.

People

AXS has a ways to go to become an industry-standard steward, resulting in a Below Average Parent Pillar rating. Aside from the overall view, portfolio managers at AXS have made a notable effort to align their interests with shareholders' by taking a personal stake and investing alongside them. Nearly 45% of the firm’s assets are represented by a manager who invests in their respective product. Longest-tenured managers’ average asset-weighted tenure within the firm is slim, two years, compared with peer firms. This contributes negatively to the rating, as the current managers have limited experience running strategies at the firm. AXS funds have demonstrated industry-standard durability, with a 52% three-year risk-adjusted success ratio. This means that 52% of products have both survived and beaten their respective category median on a risk-adjusted basis.

Parent

AXS Esoterica NEXTG Economy ETF

WUGI is an actively-managed portfolio of global companies involved in the 5G-enabled digital economy.

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The focus of a multitude of conspiracy theories across the nether regions of the internet, the returns provided by playing the move to 5G have been anything but fake.According to Esoterica Capital CEO Bruce Liu, the move to 5G is not so much an upgrade to an existing tech cycle as a re-envisioning of the entire tech stack.

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