A sound investment process and strong management team underpin SmartETFs Sustainable Energy II ETF's Morningstar Medalist Rating of Silver. 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 underweight position in yield exposure and momentum exposure compared with category peers. Low yield exposure is attributed to holding fewer stocks with high dividend or buyback yields -- instead, typically holding companies with a stronger focus on growth opposed to returning capital. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The strategy’s management team earns an Above Average People Pillar rating. The People Pillar rating is indirectly assigned by an analyst rather than algorithmically derived. Please see the notes following pillar section for more details. The strategy has a strong parent, as shown by its a high success ratio across its product shelf. It still has weak spots to strengthen, including elevated portfolio management turnover. The firm gets an Above Average Parent Pillar rating.

Analyst Rating

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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. SmartETFs Sustainable Energy II ETF earns an Above Average Process Pillar rating. 

The most important driver of the rating is the parent firm's five-year risk-adjusted success ratio of 100%. 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 firm's five-year retention rate of 90% also supports the process. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy leans toward smaller, more growth-oriented companies compared with its average peer in the Equity Energy Morningstar Category. Analyzing additional factors, this strategy has consistently had less exposure to yield compared with its Morningstar Category peers during recent years. Its preference for stocks with lower yields may well lead to a growthier portfolio. However, growth stocks court additional risks if their forecasts do not come to fruition and are often more volatile than companies with stable dividends. In the latest month, the strategy was also less exposed to the Yield factor compared with Morningstar Category peers. This strategy has also taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. In the most recent month, however, the fund's Momentum exposure was in line with the Morningstar Category average. Additionally, the strategy had less exposure to high-quality stocks compared with Morningstar Category peers in recent months. Such positions do not tend to provide much ballast for a portfolio.  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 technology and industrials relative to the category average by 30.5 and 30.0 percentage points, respectively. The sectors with low exposure compared to category peers are energy and real estate, with energy underweighting the average portfolio by 84.9 percentage points of assets and real estate similar to the average. The portfolio is composed of 35 holdings and is diversified among those holdings. In its most recent portfolio, 45.0% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category’s 49.0% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 12% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

SmartETFs Sustainable Energy II ETF earns an Above Average People Pillar rating. The team is backed by Jonathan Waghorn, the longest-tenured manager on the strategy, who brings 16 years of listed portfolio management experience.  Jonathan Waghorn is supported by an experienced team, being able to draw on four additional listed managers, who average 12 years of listed portfolio management experience. As a team, they manage two investment vehicles together, with a Silver asset-weighted algorithmically-assigned average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. There has been limited turnover among the portfolio-management ranks, which has provided stability for the investment strategy. Stability tends to go hand in hand with positive results. There have been no documented departures within the past three years. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

People

SmartETFs earns an Above Average Parent Pillar rating because of its ability to stand out in an increasingly competitive field. However, portfolio manager retention could be an area of improvement for the firm. SmartETFs has had higher turnover over the past five years, compared to peers, potentially signaling an unstable investment-team culture. SmartETFs has showcased a durable product shelf. This is demonstrated by the firm's five-year risk-adjusted success ratio of 100%, meaning that 100% of its products have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. Experienced longest-tenured management is a core advantage that SmartETFs has over others. Average asset-weighted tenure across management is 10 years, building confidence that the group has been put through its paces.

Parent

SmartETFs Sustainable Energy II ETF

SOLR is an actively-managed ETF of global stocks focused on alternative or renewable energy, held on approximately an equal-weighted basis.

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Clean energy initiatives have seen a resurgence in popularity this spring following concerns about over-reliance on Russian energy exports, as well as focused attention on the role of renewables and energy efficiency in improving global energy security. Investors looking to add exposure to the quickly growing industry should consider the SmartETFs Sustainable Energy II ETF [.

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High energy prices have reignited positive clean energy sentiment, propelling ETFs offering exposure to the energy transition. Investors looking to add exposure to the quickly growing industry should consider the SmartETFs Sustainable Energy II ETF (SOLR), which offers exposure to companies poised to benefit from the shift to sustainable energy.

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A recent “net zero 2050” report by McKinsey estimates that $9.2 trillion will need to be invested across various sectors annually to limit the global temperature rise to 1.5°C by 2050 — an estimated 60% increase on current investment levels. Investors looking to add exposure to the quickly growing industry should consider the SmartETFs Sustainable Energy [.

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2021 saw continued positive momentum for the energy transition, with policy commitments and investments made to accelerate the decarbonization of the global energy sector. The industry faced tailwinds as well, including raw material cost inflation, supply chain issues, and political tensions which have slowed the pace of growth and profitability in certain subsectors.

The Energy Transition Is Just Getting Started

The SmartETFs Sustainable Energy II ETF (SOLR) was revamped at the beginning of the year, altering its ticker symbol and primary listing venue. SOLR, previously known as SULR, moved from the CBOE to the NYSE on January 3, 2022, unifying Guinness Atkinson's ETF lineup.

News for SmartETFs Sustainable Energy II ETF ETF (SOLR)