By Brandon Rakszawski
Senior Product Manager
Built with the same approach of the Morningstar Wide Moat Focus Index to target moat companies with attractive valuations, Morningstar’s global indexes have impressed thus far in 2022.
The Morningstar® Wide Moat Focus IndexSM (the “Moat Index” or “Index”) remained ahead of the S&P 500 index by nearly 4% in 2022 (-9.13% vs. -12.76%, respectively), as of 5/31/2022, despite trailing the S&P 500 Index ever so slightly in May (-0.01% vs. 0.18%, respectively).
The Moat Index continued to benefit from strong stock selection relative to the S&P 500 Index as opposed to opportunistic sector bets. Stock selection in each month tended to drive excess return throughout 2022 with the exception of March, when stock selection was the primary driver of underperformance.
Thus far in 2022, the Moat Index’s overweight to Corteva (CTVA), Aspen Technology (AZPN), Lockheed Martin (LMT), Polaris (PII) and Western Union (WU) have provided the most contribution to excess return while its overweight to Veeva Systems (VEEV), Equifax (EFX), Boeing (BA), MercadoLibre (MIL) and Tyler Technologies (TYL) have prevented even stronger relative performance.
Strength of Moat Investing Globally
With more than 15 years of live performance history, the Moat Index’s strong performance through periods of market turmoil is well documented. However, many may overlook, or simply be unaware of, the recent stretch of success posted by Morningstar’s global moat-driven indexes.
The Morningstar® Global ex-US Moat Focus IndexSM (the “International Moat Index”) finished May ahead of the MSCI All Country World Index ex USA (the “ACWI ex USA”) by more than 8% in 2022 (-2.57% vs. -10.74%, respectively). The International Moat Index was launched in 2015 and now has over 7 years of live performance history. Like its U.S. focused counterpart, the International Moat Index has shifted to a value style posture over the years, which has been disruptive to relative returns. The International Moat Index outperformed the ACWI ex USA in 2016, 2017 and 2018 but underperformed in 2019, 2020 and 2021 as global growth stocks took center stage. The International Moat Index’s exposure to moat-rated companies with attractive valuations has positioned it well for the global market turmoil of 2022 and the market’s rotation away from growth to cyclical value-oriented businesses.
The Morningstar® Global Wide Moat Focus IndexSM (the “Global Moat Index”) is the newest of the suite, but was built using the same time-tested approach of the other moat indexes: target wide moat companies with attractive valuations. The Global Moat Index was launched in April of 2018 and focuses on wide moat valuation opportunities globally. It has also impressed in 2022, posting excess returns relative to the MSCI All Country World Index (the “ACWI”) through May of 5.3% (-7.53% vs -12.83%, respectively). Outside of 2021 when the Global Moat Index underperformed the ACWI, it has outperformed in all calendar year and standard trailing periods.
Global Moat Investing Success
As of 5/31/2022
Source: Morningstar. Index performance is not illustrative of Fund performance. Fund performance current to the most recent month end is available by visiting vaneck.com or by calling 800.826.2333. Past performance is no guarantee of future results. Indexes are unmanaged and are not securities in which an investment can be made.
Originally published by VanEck on June 13, 2022.
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Important Disclosures
Source for all data unless otherwise noted: Morningstar.
Morningstar Ratings: When applicable, ratings shown when the ETF is rated three stars or more for any given period. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics.
The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
This commentary is not intended as a recommendation to buy or to sell any of the sectors or securities mentioned herein. Holdings will vary for the MOAT ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: https://www.vaneck.com/etf/equity/moat/holdings/.
An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
The MSCI ACWI (All Country World Index) ex USA Index captures large and mid-cap representation across 22 of 23 developed markets countries (excluding the U.S.) and 24 emerging markets countries.
MSCI All Country World Index captures large and mid-cap representation across Developed Markets and Emerging Markets countries.
The Morningstar® Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Morningstar Wide Moat ETF and bears no liability with respect to that ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar® Wide Moat Focus IndexSM is a service mark of Morningstar, Inc.
The Morningstar® Global ex-US Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Morningstar International Moat ETF and bears no liability with respect to that ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar® Global ex-US Moat Focus IndexSMis a service mark of Morningstar, Inc.
The Morningstar® Global Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Morningstar Global Wide Moat ETF and bears no liability with respect to that ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar® Global Wide Moat Focus IndexSM is a service mark of Morningstar, Inc.
The Morningstar moat-driven indexes represent various regional exposures and consist of companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.
The S&P 500® Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an Index, it is unmanaged and is not a security in which investments can be made.
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An investment in the VanEck Morningstar Wide Moat ETF (MOAT®) may be subject to risks which include, among others, investing in equity securities, consumer discretionary, consumer staples, health care, industrials and information technology sectors, medium-capitalization companies, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversification and concentration risks, which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks.
An investment in the VanEck Morningstar International Moat ETF (MOTI®) may be subject to risks which include, among others, in equity securities, communication services, consumer discretionary, financials, industrials and health care sectors, medium-capitalization companies, foreign securities, foreign currency, special risk considerations of investing in Asian, Chinese, European, United Kingdom and emerging market issuers, depositary receipts, cash transactions, market, operational, high portfolio turnover, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversification and concentration risks, which may make these investments volatile in price or difficult to trade. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s returns. Medium-capitalization companies may be subject to elevated risks.
An investment in the VanEck Morningstar Global Wide Moat ETF (MOTG) may be subject to risks which include, among others, investing in equity securities, consumer staples, health care, industrials, financials and information technology sectors, medium-capitalization companies, foreign securities, foreign currency, special risk considerations of investing in European issuers, depositary receipts, market, operational, high portfolio turnover, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, and concentration risks, which may make these investments volatile in price or difficult to trade. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s returns.
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