Bitwise Web3 ETF retains its Morningstar Medalist Rating of Bronze. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position 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 team managing this passive strategy earns a Below Average People Pillar rating. To be considered a quality steward, this strategy's parent organization needs to improve factors like  personal investments from portfolio managers and portfolio managers with limited tenures at the firm. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Coinbase

Equinix

Roblox

Shopify

Take-Two Interactive Software

Block

Electronic Arts

Cloudflare

Unity Software

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. Bitwise Web3 ETF earns an Above Average Process Pillar rating. The main driver of the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 100% also underpins the process. Lastly, the process is limited by the size of its portfolio management team, only two portfolio managers.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that, before fees and expenses, correspond generally to the performance of the Bitwise Web3 Equities Index.  Under normal market conditions, the fund generally invests substantially all, but at least 80%, and of its net assets plus borrowings in the securities comprising the index. The index provides focused exposure to the equity securities of companies that are well-positioned to benefit from the emergence of Web3 and Web3 technologies. The fund is non-diversified. 

 The portfolio is overweight in financial services and communication services relative to the category average by 26.7 and 17.5 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 45.3 and 3.0 percentage points of assets, respectively. The portfolio is composed of 42 holdings and is relatively concentrated. In particular, 62.3% of the strategy's assets are housed within the top 10 holdings, as opposed to the typical peer's 52.4%. And finally, in terms of portfolio turnover, on a year-over-year basis, 32% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Bitwise Investments’s team receives a Below Average People Pillar rating. The team is bolstered by the strategy's reasonable costs, with fees that rank in its category's middle quintile. However, the rating is held back by the turnover of management across its parent firm. The firm's asset-weighted manager tenure of six years suggests it could do more to retain portfolio managers. The number of months that the management team has been running this vehicle together also holds the rating back. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.

Below Average

People

Bitwise Investments has a ways to go to become an industry-standard steward, resulting in a Below Average Parent Pillar rating. None of the firm’s assets are covered by an invested manager. Team members’ investments are viewed as helping to encourage long-term thinking and align portfolio manager and investor interests. Only two years of average tenure among Bitwise Investments's longest-tenured managers gives us pause. In isolation, seasoned teams tend to have more experience to draw upon should they need to navigate turbulent market conditions. The firm's lineup has been durable. It has had a five-year success ratio of 100%, meaning that of the strategies with a five-year track record, 100% have survived and beaten their respective category median.

Parent

Bitwise Web3 ETF

BWEB tracks a tier-weighted index of companies connected to the global Web 3.0 industry. The selection process is overseen by a committee.

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News for Bitwise Web3 ETF ETF (BWEB)