ETF Pulse Check Evaluating the CornerCap Fundametrics Large-Cap ETF FUNL

The CornerCap Fundametrics Large-Cap ETF (FUNL) is an actively managed fund that strategically invests in US large-cap stocks. With a focus on fundamental analysis, the fund evaluates potential holdings across more than 120 key factors, aiming to capture a diversified blend of value, growth, and other investment styles. This approach enables FUNL to optimize its risk-adjusted returns by emphasizing securities with strong relative valuation, robust earnings growth rates, and solid cash flow metrics. In today's volatile market environment, this ETF's strategy is particularly relevant as it aims to avoid high-risk stocks while maintaining a balanced exposure across various sectors. As the global economic landscape shifts due to geopolitical and macroeconomic uncertainties, FUNL's diversified strategy may offer a stable investment avenue for navigating these complexities.

Basic Information
The CornerCap Fundametrics Large-Cap ETF, identified by the ticker FUNL, is managed by CornerCap Investment Counsel, Inc., and was launched on August 19, 2020. The fund carries an expense ratio of 0.50%, which reflects its active management approach. The top fifteen holdings of FUNL include prominent names such as Johnson & Johnson (2.13%), Wells Fargo (1.69%), and Cisco Systems (1.63%), among others, with a combined weight of approximately 18.11%. The ETF's sector exposure is led by the financial sector at 5.24%, followed by communication services at 3.58% and health care at 3.24%. Recent net flow ratios over the past 7 and 30 days are negative, at -0.11% and -0.03% respectively, indicating modest investor outflows. In terms of performance, FUNL has delivered average returns of 1.85% over 6 months, 6.73% over 1 year, and 3.70% over 3 years, with corresponding volatility levels of 5.07%, 7.96%, and 7.13%. The fund has experienced maximum return drawdowns of 0.80% over 1 year and 1.00% over 3 years.

News Summary
The CornerCap Fundametrics Large-Cap ETF confronts a range of macroeconomic challenges that could impact its performance. Notably, trade tensions between the US and India, inflamed by tariff policies, pose risks to tech giants like Alphabet, which are part of FUNL's holdings. Additionally, the strategic manufacturing shift by Apple to India underscores the geopolitical risks that could reverberate through the tech sector. The US employment figures' downward revisions suggest potential shifts in monetary policy, including possible interest rate cuts, which could affect financial institutions such as Wells Fargo and JPMorgan Chase. Furthermore, the unexpected decline in US wholesale inflation might lead the Federal Reserve to reevaluate its inflation targets, influencing sectors like information technology and industrials. Geopolitical tensions, notably Poland's reaction to Russian aggression, highlight the instability risks for multinational corporations reliant on global markets. Lastly, consumer sentiment shifts, evidenced by Delta Air Lines' report of rebounded confidence, suggest resilience but also vulnerabilities for consumer-focused companies like The Walt Disney.

Analyst Rating: Sell
The CornerCap Fundametrics Large-Cap ETF presents a mixed investment profile, warranting a cautious approach. Its expense ratio of 0.50% is moderate but may not be competitive against lower-cost alternatives. Both the 7-day and 30-day net flow ratios are negative, signaling potential investor outflows and reduced recent appeal. While the average returns over 6 months, 1 year, and 3 years show modest growth, they fall short of more aggressive benchmarks. However, the ETF's return stability is favorable, with consistently low volatility and minimal drawdowns, appealing to risk-averse investors. Despite excellent diversification across its top holdings, the limited sector concentration, with the largest at only 5.24%, suggests a lack of focused exposure. Overall, while FUNL demonstrates stability and diversification, its lackluster returns and negative capital flows suggest a cautious investment stance.

Backtest Scenario
A backtest of the CornerCap Fundametrics Large-Cap ETF's performance during the 2020 financial sector volatility, caused by the COVID-19 pandemic, would provide insights into its resilience and adaptability in times of economic distress. However, specific results of such a backtest are not provided here.

Risk Outlook
The CornerCap Fundametrics Large-Cap ETF navigates a complex risk landscape shaped by macroeconomic and sector-specific factors. The significant exposure to financials, health care, and communication services highlights vulnerabilities to changes in US monetary policy, particularly interest rate adjustments by the Federal Reserve. Geopolitical tensions, especially those involving the US and India, could disrupt operations for tech companies like Alphabet. The ETF's net flow ratios suggest a mild outflow trend, indicating potential liquidity risks influenced by market sentiment. Key holdings' concentration, including Johnson & Johnson and Wells Fargo, suggests that sector-specific downturns could disproportionately affect the ETF. Furthermore, geopolitical instability in Eastern Europe presents challenges for multinational holdings reliant on global supply chains. Despite consumer sentiment resilience, ongoing trade tensions may dampen consumer-driven sectors, impacting companies like The Walt Disney.

Conclusion
The CornerCap Fundametrics Large-Cap ETF offers a diversified investment strategy with stable returns, appealing to conservative investors seeking lower volatility. However, its modest growth and recent negative capital flows warrant caution. Investors should monitor macroeconomic and geopolitical developments closely, as these could significantly impact the ETF's performance across its diverse sector exposures.