Exchange-traded funds (ETFs) have garnered over $400 billion in capital despite a challenging market environment in 2020. Rather than cast a wide net into a growing sea of ETFs, investors can opt for a qualitative and quantitative strategy in one ETF through the VanEck Vectors Morningstar Wide Moat ETF (MOAT).
MOAT seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Morningstar® Wide Moat Focus Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index.
The index is comprised of securities issued by companies that Morningstar, Inc. (“Morningstar”) determines to have sustainable competitive advantages based on a proprietary methodology that considers quantitative and qualitative factors (“wide moat companies”).
MOAT gives investors access to:
- Wide Moat Companies: A focus on U.S. companies Morningstar believes possess sustainable competitive advantages, or “moats”
- A Focus on Valuations: Index targets companies trading at attractive prices relative to Morningstar’s estimate of fair value
- Morningstar’s Equity Research: Index fueled by Morningstar’s forward-looking, rigorous equity research process driven by over 100 analysts globally
ETFs Outpacing Mutual Funds
Getting quality exposure to ETFs via MOATs couldn’t come at a better time for the marketplace. More investors have been piling into ETFs and shunning their mutual fund counterparts.
“The arms race between mutual funds and their exchange-traded brethren turned into a beat-down in 2020,” a Bloomberg article noted. “Roughly $427 billion has poured into U.S. exchange-traded funds this year, divided almost evenly between equity and fixed-income funds, according to Bloomberg Intelligence data. Meanwhile, mutual funds have bled roughly $469 billion of assets in 2020, on track for the worst year on record in Investment Company Institute data going back to 1990.”
“The investor experience isn’t that great. You’re paying high fees for a less tax-efficient vehicle that also underperformed its benchmark,” said Matt Bartolini, head of SPDR Americas Research. “So, not surprisingly, you’ve seen significant outflows, since investors aren’t willing to pay that fee to then get saddled with a tax bill that they didn’t force because someone else redeemed out of the fund.”
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