JPMorgan Diversified Return EMkts Eq ETF JPEM

The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.

The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in yield exposure and an underweight in volatility exposure compared with category peers. High yield exposure is attributed to holding more stocks with high dividend or buyback yields. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan Diversified Return EMkts Eq ETF earns a High Process Pillar rating.

The primary contributor to the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. This fund tracks an index, which also increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Respectable risk-adjusted performance also strengthens the process, as shown by the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk.

This strategy skews toward smaller, deeper value companies compared with its average peer in the Diversified Emerging Mkts Morningstar Category. Analyzing additional factors, this strategy has continually displayed high-yield exposure compared with Morningstar Category peers during recent years, holding more companies returning cash to shareholders via dividends or buybacks. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In this month, however, the strategy had more exposure to the Quality factor than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.

The portfolio is overweight in utilities and industrials relative to the category average by 7.3 and 5.2 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 19.9 and 4.0 percentage points of assets, respectively. The strategy owns 543 securities and is less top-heavy than peers. Specifically, 10.3% of the fund’s assets are concentrated within the top 10 fund holdings, as opposed to the category average's 29.0%. And finally, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.

This share class’ quantitatively driven People Pillar content was not generated because of insufficient data. To generate individualized content, the Medalist Rating quantitative analysis requires sufficient data to generate its framework of “ mental models ” designed to mimic content written by analysts.

An algorithmically assigned People Pillar uses an algorithm designed to predict the People Pillar rating analysts would assign the investment product, if they covered it.

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

This share class outpaced its average peer by 69 basis points annualized over a nine-year period. And it also beat the category index, the MSCI Emerging Markets Index, by an annualized 30 basis points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing five-year period. This strategy also delivered a smooth ride for investors, with a relatively low standard deviation of 16.9%, compared with the benchmark’s 18.6%. However, the share class proved itself ineffective as it was unable to generate alpha, over the same five-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class is within the cheapest quintile of its Morningstar Category. Its attractive fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class has the ability to deliver positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Gold.