Securities lending has historically been employed by the fund to generate additional income, which has helped reduce some of its annual expense ratio.
The fund’s portfolio closely resembles its average category peer in both style and sector allocations. Capturing the same opportunity set as its active peers emphasizes the effect of the fund’s low fee, giving it a durable advantage over the long run.
This fund is well diversified compared with its peers. Its top 10 holdings represent 24% of the portfolio, much lower than its average peer. However, the portfolio can become top-heavy during the market’s manic episodes, though it remains more diversified than the category average. Over shorter time frames, investors’ enthusiasm for a particular stock or sector can make the portfolio top-heavy as it tilts toward recent winners. For example, the fund’s top 10 holdings ballooned to 30% of the portfolio in November 2021 before markets reversed in 2022.
Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.