The combination of a middling Process Pillar rating and a Low People Pillar rating limit  Global X Data Center & Dgtl Infrs ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The team managing the passive strategy earns a Low People Pillar. The strategy earns an Average Process Pillar rating.  Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Equinix

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NVIDIA

Micron Technology

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. Global X Data Center & Dgtl Infrs ETF earns an Average Process Pillar rating. The leading factor in the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The size of the portfolio management team also reinforces the process. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 28%. 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 relatively low success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Data Center REITs & Digital Infrastructure Index.  The fund invests at least 80% of its total assets, plus borrowings for investments purposes, in the securities of the Solactive Data Center REITs & Digital Infrastructure Index and in ADRs and GDRs based on the securities in the index. The index is designed to provide exposure to companies that have business operations in the fields of data centers, cellular towers, and and/or digital infrastructure hardware. The fund is non-diversified. 

 The portfolio is overweight in technology and communication services relative to the category average by 30.4 and 10.2 percentage points, respectively. The sectors with low exposure compared to category peers are real estate and consumer cyclical, with real estate underweighting the average portfolio by 38.4 percentage points of assets and consumer cyclical similar to the average. The strategy owns 26 securities and is relatively concentrated. Specifically, 70.2% of the strategy's assets are housed within the top 10 holdings, as opposed to the typical peer's 61.5%. And finally, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.

Average

Process

Global X’s team earns a Low People Pillar rating. The main detractor from the rating is the parent firm's five-year success ratio of 28%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median 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 58% also detracts from the team. The experience of the management team, which averages four years at this fund, hinders the team as well.

People

Mirae Asset Global Investments is a Korean asset manager and a key player in the Asian financial market. It is a wholly owned subsidiary of Mirae Asset Financial Group, founded by Hyeon Joo Park. Park’s leadership and entrepreneurial spirit have been the driving force behind the global rise of Mirae, and he holds a majority stake in the business. 
Mirae Asset has grown significantly over the years (USD 198 billion as of December 2022) across a diversified platform, of which about 60% of assets are managed in South Korea. We believe that Mirae’s core mutual fund business in the Asia-Pac region is relatively strong. It has a collaborative structure, a strong and large investment team, low manager turnover, competitive fees, and a disciplined approach to product-development pointing toward better stewardship practices relative to peers in these markets. However, this is in stark contrast to its exchange-traded fund business, which accounts for 41% of the total assets. 
The firm’s ETF lineup focuses largely on high-risk thematic strategies that seem gimmicky, emphasizing short-term asset-gathering. The firm appears to leverage trending topics such as robotics and artificial intelligence, virtual reality and gaming, and cloud computing. There’s a notable concern regarding the potential liquidation of these funds since they seem to be designed around investment fads. Furthermore, these products are often expensive, especially compared with broadly diversified index funds and ETFs. Unsurprisingly, Mirae's reflexive product-development strategy has led to an increase in fund closures.
Our experience engaging with the MAGI team to gather critical information for the parent assessment has not been as positive. It hasn’t been as transparent in its disclosures, and unlike its peers, its responsiveness has been inadequate. We prefer firms with a more transparent corporate culture. Overall, these actions hold us back, and the firm retains its Parent Pillar rating of Average.

Parent

Global X Data Center & Digital Infrastructure ETF

DTCR tracks a market-cap-weighted index of global equities involved in data center REITs and related digital infrastructure companies.

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