Ionic Inflation Protection ETF's Average People Pillar and Process Pillar ratings result in 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-costliest quintile among peers.  

 The strategy benefits from a notable effort from managers to align personal interests with shareholders by investing alongside them. This helps drive the team's Average People Pillar rating. The fund's assessment results in an Average Process Pillar rating. The strategy's parent organization still has a way to go to reach the industry standard, evidenced by relatively short-tenured portfolio managers and a pricey fund lineup. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Morningstar's evaluation of this fund's process seeks to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Ionic Inflation Protection ETF earns an Average Process Pillar rating.    The most meaningful contributor to the rating is the firm's five-year retention rate of 100% over the period. The scale of the portfolio management team also supports the process. With five portfolio managers, the fund is well-staffed. Lastly, the process is limited by high costs across its parent firm's funds, whose fees rank in their category's costliest 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 costs down.

 The investment strategy as stated in the fund's prospectus is as follows: 


The investment seeks capital appreciation in elevated and rising inflationary environments.  The fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing in: inflation swaps; options on U.S. interest rates (“swaptions”); and U.S. Treasury Securities, including U.S. Treasury Inflation-Protected Securities (“TIPS”). Under normal market conditions, and the fund will invest up to 30% of its net assets in inflation swaps and swaptions to seek to achieve the fund’s investment objective. It is non-diversified.

 This strategy's 12-month yield is 5.8%, higher than its average peer's 4.8%. While a higher yield may deliver more income, it also tends to indicate higher credit risk.

Average

Process

Ionic Inflation Protection ETF earns an Average People Pillar rating. The main contributor to the rating is the depth of its portfolio management team. With five portfolio managers at the helm, the fund is well-staffed. This fund's costs, which rank in the category's second most expensive quintile, also improve the rating. Although that could still be improved, it is better than some of the funds in this category. Lastly, the rating is limited by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns.


The team is backed by Michael J. Venuto, the longest-tenured manager on the strategy, who brings 11 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.5 stars, demonstrating disappointing risk-adjusted performance compared with category peers. The highest personal investment in this offering by any of its managers is at least $1 million. An investment of that size is large enough to align managers' interests with investors.

People

At this time, Ionic Capital's assessment results in a Below Average Parent rating. In its one-year history as a firm, there has been little evidence to suggest Ionic Capital is a superior steward of capital compared with other asset managers. Ionic Capital currently manages one vehicle, with a total of $14.1 million under management and a roster of five fund managers. Even though Ionic Capital is a relatively new firm, it has brought on experienced managers, averaging 10 years of total industry experience. Furthermore, this experienced team has stayed together, as evidenced by a high manager retention ratio. 

 Lofty fees on open-end and exchange-traded funds at Ionic Capital detract from fund performance. Compared with its peers, the average expense ratio of the firm's fund lineup is in the second-highest quintile.  

 To upgrade the firm's rating, Ionic Capital needs to build a consistent track record of positive investor experience.

Below Average

Parent

Ionic Inflation Protection ETF

CPII is an actively managed fund that invests in inflation swaps, swaptions, and US TIPS that are expected to benefit from inflation, increasing interest rates, and fixed income volatility.

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