Q1 2022 Investment Style Ratings For ETFs And Mutual Funds

Stock Market


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As the first quarter of 2022 opens, the All Cap Value, All Cap Blend, and Large Cap Blend fund styles earn Attractive-or-better ratings. Our style ratings are based on the normalized aggregation of our fund ratings for each ETF and mutual fund in each style. Our fund ratings are based on aggregations of the ratings of the stocks they hold.

The primary driver behind an Attractive fund rating is good portfolio management, or good stock picking and low total annual costs. However, Attractive-or-better total annual costs are by no means an automatic qualification for an Attractive-or-better fund rating. This fact underscores that (1) cheap funds can dupe investors and (2) investors should invest only in funds with good stocks and low fees.

See Figures 4 through 13 for a detailed breakdown of ratings distributions by investment style.

Figure 1: Ratings for All Investment Styles

Style Ratings 1Q22

Style Ratings 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

To earn an Attractive-or-better Predictive Rating, an ETF or mutual fund must have high-quality holdings and low costs. Only the top 30% of all ETFs and mutual funds earn our Attractive-or-better rating.

Deutsche DWS CROCI Equity Dividend Fund (KDHTX) is the top rated All Cap Value fund. It gets our Very Attractive rating by allocating over 75% of its value to Attractive-or-better-rated stocks.

Optimum Small Mid Cap Growth Fund (OASGX) is the worst rated Small Cap Growth fund. It gets our Very Unattractive rating by allocating over 50% of its value to Unattractive-or-worse-rated stocks. Making matters worse, it charges investors total annual costs of 4.55%.

Figure 2 shows the distribution of our Predictive Ratings for all investment style ETFs and mutual funds.

Figure 2: Distribution of ETFs & Mutual Funds (Assets and Count) by Predictive Rating

Distribution of Style Ratings 1Q22

Distribution of Style Ratings 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 3 offers additional details on the quality of the investment style funds. Note that the average total annual cost of Very Unattractive funds is almost five times that of Very Attractive funds.

Figure 3: Predictive Rating Distribution Stats

Distribution of Style Ratings Stats 1Q22

Distribution of Style Ratings Stats 1Q22 (New Constructs, LLC)

* Avg TAC = Weighted Average Total Annual Cost

Source: New Constructs, LLC and company filings

Ratings by Investment Style

Figure 4 presents a mapping of Very Attractive funds by investment style. The chart shows the number of Very Attractive funds in each style and the percentage of assets allocated to Very Attractive-rated funds.

Figure 4: Very Attractive ETFs & Mutual Funds by Investment Style

Very Attractive Style Ratings 1Q22

Very Attractive Style Ratings 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 5 presents the data charted in Figure 4.

Figure 5: Very Attractive ETFs & Mutual Funds by Investment Style

Very Attractive Style Ratings Table 1Q22

Very Attractive Style Ratings Table 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 6 presents a mapping of Attractive funds by investment style. The chart shows the number of Attractive funds in each style and the percentage of assets allocated to Attractive-rated funds.

Figure 6: Attractive ETFs & Mutual Funds by Investment Style

Attractive Style Ratings 1Q22

Attractive Style Ratings 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 7 presents the data charted in Figure 6.

Figure 7: Attractive ETFs & Mutual Funds by Investment Style

Attractive Style Ratings Table 1Q22

Attractive Style Ratings Table 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 8 presents a mapping of Neutral funds by investment style. The chart shows the number of Neutral funds in each style and the percentage of assets allocated to Neutral-rated funds.

Figure 8: Neutral ETFs & Mutual Funds by Investment Style

Neutral Style Ratings 1Q22

Neutral Style Ratings 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 9 presents the data charted in Figure 8.

Figure 9: Neutral ETFs & Mutual Funds by Investment Style

Neutral Style Ratings Table 1Q22

Neutral Style Ratings Table 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 10 presents a mapping of Unattractive funds by investment style. The chart shows the number of Unattractive funds in each style and the percentage of assets allocated to Unattractive-rated funds.

The landscape of style ETFs and mutual funds is littered with Unattractive funds. Investors in Small Cap Growth have put over 61% of their assets in Unattractive-rated funds.

Figure 10: Unattractive ETFs & Mutual Funds by Investment Style

Unattractive Style Ratings 1Q22

Unattractive Style Ratings 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 11 presents the data charted in Figure 10.

Figure 11: Unattractive ETFs & Mutual Funds by Investment Style

Unattractive Style Ratings Table 1Q22

Unattractive Style Ratings Table 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 12 presents a mapping of Very Unattractive funds by investment style. The chart shows the number of Very Unattractive funds in each style and the percentage of assets allocated to Very Unattractive-rated funds.

Figure 12: Very Unattractive ETFs & Mutual Funds by Investment Style

Very Unattractive Style Ratings 1Q22

Very Unattractive Style Ratings 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

Figure 13 presents the data charted in Figure 12.

Figure 13: Very Unattractive ETFs & Mutual Funds by Investment Style

Very Unattractive Style Ratings Table 1Q22

Very Unattractive Style Ratings Table 1Q22 (New Constructs, LLC)

Source: New Constructs, LLC and company filings

This article originally published on January 19, 2022.

Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector or theme.



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