JPMorgan BetaBuilders U.S. TrsBd20+YrETF BBLB

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

The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in government bonds and an underweight in debt with 15- to 20-year maturities compared with category peers. 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.

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term.

The main driver of the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons.

The investment strategy as stated in the fund's prospectus is:

The investment seeks results that closely correspond, before fees and expenses, to the performance of the ICE U.S. Treasury 20+ Year Bond Index. The fund seeks investment results that closely correspond, before fees and expenses, to the performance of the underlying index, which measures the performance of U.S. dollar-denominated, and fixed rate securities with minimum term to maturity greater than twenty years. The fund will invest at least 80% of its assets in securities included in the underlying index.

This strategy's 12-month yield is 4.5%, higher than its average peer's 4.0%. In addition, it has a 4.3% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Higher yields tend to indicate higher credit risk. The portfolio has a lower average surveyed credit quality of AA, compared with the typical peers' AAA and it holds no non-investment-grade assets, similar to its average peer. Strategies that take on more credit risk tend to be at their best when markets are as well. This risk contributes to strong performance during bull markets at the cost of losing more on the downside. In terms of long-term interest-rate risk, this strategy is on par with peers. The longer a strategy's duration, the more sensitive it is to shifts in interest rates. This fund, with a 16.6-year duration, is expected to gain 16.6% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

There are three managers listed on the fund: Jan Ho, Mark Willauer, Evan Olonoff. Overall, management experience is lacking on the team, with only an average of four years spent in the industry. Together, they manage a total of six strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. The team has lacked continuity recently, with Naveen Kumar leaving about a month ago, detracting from its rating. Even though it is a passive fund, high turnover can still hinder the effectiveness of the investment process.

Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

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.

However, its track record is too short to draw a meaningful conclusion. In the past twelve months, this share class has returned 4.0%, compared with the 4.9% return of the category benchmark, the Bloomberg Barclays U.S. Government Long-Term Bond Index, for the same period. During that time, it also trailed the category average's 4.7% return for the period.

This fund lands in the second-cheapest quintile of its Morningstar Category. Its affordable expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class has high potential to deliver positive alpha relative to the lesser of its median category peer or the category benchmark, leading to its Morningstar Medalist Rating of Bronze.