JPMorgan BetaBuilders US Equity ETF BBUS

The portfolio maintains a sizable cost advantage over competitors, priced within the lowest 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 an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher 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 BetaBuilders US Equity ETF earns an Above Average Process Pillar rating.

The most significant contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Respectable risk-adjusted performance also supports the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period.

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

The investment seeks investment results that closely correspond, before fees and expenses, to the performance of the Morningstar® US Target Market Exposure IndexSM. The underlying index is a free float adjusted market capitalization weighted index which consists of equity securities primarily traded in the United States. The underlying index targets 85% of those stocks by market capitalization, and and primarily includes large- and mid-cap companies. The fund will invest at least 80% of its assets in securities included in the underlying index.

The portfolio has allocations in its top two sectors, technology and real estate, that are similar to the category. The sectors with low exposure compared to category peers are industrials and healthcare; however, the allocations are similar to the category. The strategy owns 559 securities and is less top-heavy than peers. Specifically, 33.3% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the category’s 48.4% average. And in closing, 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.

Narrowing in on the past three-year period, it beat the category index, the Russell 1000 Index, by an annualized 24 basis points, and outperformed the category average by 1.2 percentage points. And more importantly, when extended to a longer time frame, the strategy surpassed the index. On a five-year basis, it led the index by an annualized 23 basis points.

The risk-adjusted performance only continues to make a case for this fund. The share class led the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing five-year period. These strong risk-adjusted results have not resulted in a bumpier ride for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. However, the share class proved itself ineffective as it was unable to generate alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Thus, assessing cost is a critical step in any investment evaluation. This fund is in the cheapest quintile of its Morningstar Category. Its competitive fee, taken together with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha versus the lesser of its median category peer or the category benchmark, leading to its Morningstar Medalist Rating of Silver.