The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Acruence Active Hedge US Equity ETF to a Morningstar Medalist Rating of Neutral.  Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-highest quintile among peers.  

 The strategy's management team is about as experienced as others, but due to other weaknesses, the strategy earns a Below Average People Pillar. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight 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. To be considered a quality steward, this strategy's parent organization needs to improve factors like a bench of relatively inexperienced portfolio managers and high fees. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Prudential Financial

Truist Financial

KeyCorp

LyondellBasell Industries

Sempra Energy

Booking Hlds

First Solar

Lincoln National

CME Group

Broadcom

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Acruence Active Hedge US Equity ETF earns an Average Process Pillar rating. 

The primary contributor to the rating is the firm's five-year retention rate of 100% over the period. The size of the portfolio management team also bolsters the process. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by high costs across its parent firm's funds, whose fees rank in their category's highest-cost quintile on average. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep expenses low.

 This strategy tends to pick smaller market-cap firms compared with the average fund in its peer group, the Large Blend Morningstar Category.  But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Looking at additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. In recent months, the strategy also had less Quality 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 utilities relative to the category average by 16.6 and 4.1 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and communication services, underweight the average by 10.2 and 8.1 percentage points of assets, respectively. The portfolio is composed of 50 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 32.6% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 48.8% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 14% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Acruence Active Hedge US Equity ETF earns a Below Average People Pillar rating. The team is supported by the firm's five-year retention rate of 100%. However, the rating is held back by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns. Management team experience, which averages seven years at this fund, also holds the rating back.

Below Average

People

Acruence is a relative newcomer with only a two-year record. There have yet to be signs suggesting that Acruence is a topnotch steward. As a result, it is assigned a Below Average Parent rating until there's contrary evidence. Acruence currently runs one vehicle, with a total of $6.8 million under management and a bench of four portfolio managers.   

 Lofty fees on open-end and exchange-traded funds are a headwind at the firm, where the average net expense ratio, compared with other firms, is in the second-costliest quintile.  

 To upgrade the firm's rating, Acruence will be expected to build a consistent track record of positive investor experience.

Parent

Acruence Active Hedge U.S. Equity ETF

XVOL is an actively managed fund that seeks capital growth with reduced volatility as compared to the S&P 500 by purchasing options contracts on the VIX Index.

On Thursday, ETF newcomer Acruence Capital launched its first fund, the Acruence Active Hedge U.S. Equity ETF (XVOL), an actively managed large cap equity ETF that uses VIX options to reduce volatility. The fund, which is listed on the NYSE, carries an expense ratio of 0.83%.

News for Acruence Active Hedge U.S. Equity ETF ETF (XVOL)