Weakness in Roundhill Generative AI & Technology ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy receives a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in 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. The longest-tenured manager has a wealth of experience, but other weaknesses limit it to a Low People Pillar rating. The strategy's parent firm has some investor-friendly attributes, like overall attractive fees, but it is held back by a below-average success ratio across its lineup. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

NVIDIA

Microsoft

Alphabet

Adobe

ServiceNow

salesforce.com

Amazon

Super Micro Computer

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. Roundhill Generative AI & Technology ETF earns a Low Process Pillar rating. 

The most substantial detractor from the rating is the parent firm's five-year risk-adjusted success ratio of 0%. 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. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 72% also limits the process. Management team experience, which averages seven years at this fund, detracts from the rating as well.

 This strategy has more exposure to the Growth factor than the Technology Morningstar Category average. But in terms of market capitalization, it is on par with peers. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last 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 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. Such exposure tends to pay off when markets are hot and to be costly when they are not. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, the portfolio has tended to underweight yield, as shown in its lower exposure to companies that pay dividends or buy back shares than peers over these years. Returning capital to shareholders often is not the highest priority of such businesses. The shares of such companies can deliver strong returns if they fulfill their growth projections, but they also carry more risk. In recent months, the strategy also had less Yield 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 communication services by 10.8 percentage points in terms of assets compared with the category average, and its consumer cyclical allocation is similar to the category. The sectors with low exposure compared to category peers are technology and industrials, underweight the average by 6.3 and 2.9 percentage points of assets, respectively. The portfolio is positioned across 49 holdings and its assets are more dispersed than peers in the category. In particular, 45.1% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the category average's 52.4%.

Process

Roundhill Generative AI & Technology ETF earns a Low People Pillar rating. The number one detractor from the rating is the experience of the management team, which averages seven years at this fund. The managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns, also detracts from the team. The parent firm's five-year success ratio of 0% further holds the rating back. 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.


None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

People

Roundhill has some investor-friendly attributes, but other attributes warrant caution, leading to an Average Parent Pillar rating. One notable advantage of Roundhill is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the second-cheapest quintile of category peers. Roundhill strategies have failed to have lengthy success. In particular, the firm's three-year success ratio demonstrates that only 0% have both survived and beaten their respective category median. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. The Roundhill roster of open-end and exchange-traded funds has had below-average risk-adjusted performance, as seen in its average three-year Morningstar Rating of 1.3 stars.

Average

Parent

Roundhill Generative AI & Technology ETF

CHAT is an actively managed fund that invests in 25 to 50 companies around the world that are involved in generative artificial intelligence and other related technologies.

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Roundhill Magnificent Seven ETF

NEW YORK , May 9, 2024 /PRNewswire/ -- Roundhill Investments, an ETF sponsor focused on innovative financial products, is pleased to announce that the firm has surpassed $1 billion in assets under management (AUM) across its ETF suite. Roundhill acts as Adviser or Sub-Adviser to a total of fourteen ETFs, ranging from thematic equity to options income products.

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$100 million in assets achieved less than one year since CHAT's launch, signaling significant organic investor demand. NEW YORK , Feb. 23, 2024 /PRNewswire/ -- Roundhill Investments, an ETF sponsor focused on innovative financial products, is pleased to announce that the Roundhill Generative AI & Technology ETF (NYSE Arca: CHAT) has surpassed $100 million in assets under management (AUM).

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YieldMax Magnificent 7 Fund of Option Income ETF

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ALPS Medical Breakthroughs ETF

Robo Global Artificial Intelligence ETF

SoFi Web 3 ETF

WisdomTree Cybersecurity Fund

Wisdomtree Artificial Intelligence And Innovation Fund

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Advanced Micro Devices

Global X Robotics & Artificial Intelligence ETF

Intel

Intuitive Surgical

UiPath

ROBO Global Robotics and Automation ETF

SoundHound AI Inc

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Baidu

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Roundhill Generative AI & Technology ETF invests in tech giants, but its exposure to generative AI is minimal. The expense ratio of CHAT is high compared to alternative ETFs like QQQ. Roundhill Investments' track record with other ETFs raises concerns about the performance of CHAT.

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The Generative AI ETF focuses on generative artificial intelligence technology, with a portfolio consisting of companies pioneering the rapidly growing field. I give the ETF a sell rating due to its high expense ratio and concerns about a near-term peak in AI froth, as well as seasonal weakness in June. Investors seeking AI exposure may consider a more diversified portfolio with lower costs, such as a mix of QQQ, XLK, and SMH along with owning individual equities outright.

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Fidelity MSCI Information Technology Index ETF

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The success of ChatGPT explains the growth for generative AI's potential. Hence, a pure-play ETF on this concept is now available to you.

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News for Roundhill Generative AI & Technology ETF ETF (CHAT)