JPMorgan Active Developing Mkts Eq ETF JADE

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

The strategy’s management team earns a High People Pillar rating. The strategy's investment approach stands out and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight liquidity exposure and momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And momentum exposure is rooted in holding stocks currently on a winning streak. 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 Active Developing Mkts Eq ETF earns a High Process Pillar rating.

The most important driver of the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 53% also strengthens the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. Management team experience, which averages 22 years at this fund, contributes to the process as well.

This strategy leans toward larger, higher-growth companies compared with its average peer in the Diversified Emerging Mkts Morningstar Category. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also had more exposure to high-momentum stocks in recent years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. Compared with category peers, the strategy also had more exposure to the Momentum factor in the most recent month. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This orientation tends to pay off most prominently when markets are hot. Nevertheless, the fund's Volatility exposure was in line with peers in the latest month. 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 financial services and technology relative to the category average by 8.2 and 4.6 percentage points, respectively. The sectors with low exposure compared to category peers are basic materials and industrials, underweight the average by 4.4 and 3.1 percentage points of assets, respectively. The strategy owns 130 securities and is relatively top-heavy. Of the strategy's assets, 31.4% are concentrated within the top 10 holdings, compared to the typical peer's 29.2%.

Leon Eidelman, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of listed portfolio management experience. Leon Eidelman has an experienced listed co-manager. Together, they average 22 years of listed portfolio management experience. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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.

That said, it is too early to have a strong opinion on its prospects. In the past three months, this share class has returned 4.6%, compared with the 5.9% return of the category benchmark, the MSCI Emerging Markets Index, for the same period. But during that time, it outperformed the category average's 4.2% return for the period.

This share class is in the cheapest quintile of its Morningstar Category. Its competitive expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha against its category benchmark, leading to its Morningstar Medalist Rating of Gold.