The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  AAM Low Duration Pref & Inc Secs ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The team managing the passive strategy earns a Below Average People Pillar. The fund's assessment garners an Average Process Pillar rating. Even though the strategy's parent organization has some investor-friendly attributes like portfolio managers who invest a considerable amount in their strategy, a below-average success ratio across its lineup holds it back. As a result, the firm obtains a Below Average Parent Pillar.

Analyst Rating

AAM Low Duration Pref & Inc Secs ETF earns an Average Process Pillar rating. 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. The most significant contributor to 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 process is limited by the parent firm's five-year risk-adjusted success ratio of 33%. The measure indicates the percentage of a firm's funds that survived and outperformed 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 investment strategy as stated in the fund's prospectus is: 

The investment seeks to track the total return performance, before fees and expenses, of the ICE 0-5 Year Duration Exchange-Listed Preferred & Hybrid Securities Index.  The index measures the performance of exchange-listed, U.S. dollar-denominated preferred securities and hybrid securities listed on the New York Stock Exchange ("NYSE") or NASDAQ Capital Market ("NASDAQ") with an option-adjusted duration of less than five years. Under normal circumstances, at least 80% of the fund’s net assets, plus borrowings for investment purposes, and will be invested in preferred and income securities.  

 This strategy's 12-month yield is 7.3%, higher than its average peer's 5.9%. In addition, it has a 6.4% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Higher yields tend to indicate higher credit risk.

Average

Process

AAM’s team earns a Below Average People Pillar rating. The team is strengthened by the strategy's costs, which rank in its category's least expensive fifth. Fees detract from net returns, so the managers have a lower expense hurdle to overcome. However, the rating is weakened by the combined average five-year excess return of each manager, which suggests that the funds they manage have trailed their respective category average. The instability of its management team also holds the team back. The fund last saw a manager change one month ago.

Below Average

People

AAM lags peer asset managers in a number of stewardship qualities, resulting in a Below Average Parent Pillar rating. Aside from the overall view, the firm's portfolio managers have worked to align their interests with investors' by taking a personal stake and investing alongside them. Almost 40% of the firm’s assets are covered by invested managers. AAM fails to showcase longevity across its product shelf, as evidenced by its five-year risk-adjusted success ratio. Over this time period, only 33% of its roster has been able to both survive and beat its respective category median on a risk-adjusted basis. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. The firm charges fees on its open-end and exchange-traded funds that are on par with category peers. On average, fees on its funds are within the middle quintile, giving it neither an advantage nor disadvantage compared with the competition.

Parent

AAM Low Duration Preferred and Income Sec ETF

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