JPMorgan Active China ETF JCHI

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

The strategy’s management team earns an Above Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. 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 China ETF earns an Above Average Process Pillar rating.

The largest contributor to the rating is its parent firm's superior 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 supports the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. However, the process is limited by the experience of the management team, which averages four years at this fund.

This strategy hews closely to the market cap and investment style of its China Region category peers. Examining additional factor exposure, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. In addition, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. In recent months, the strategy also had less Volatility factor exposure 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 energy relative to the category average by 4.0 and 2.7 percentage points, respectively. The sectors with low exposure compared to category peers are technology and healthcare, with technology underweighting the average portfolio by 3.5 percentage points of assets and healthcare similar to the average. The portfolio is positioned across 51 holdings and is quite concentrated. Specifically, 47.0% of the strategy's assets are housed within the top 10 holdings, as opposed to the typical peer's 36.7%. 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.

The strategy is backed by Rebecca Jiang, the longest-tenured manager, who has been a listed portfolio manager for seven years. Rebecca Jiang's supporting team includes one other listed manager. Together, they average four years of listed portfolio management experience. As a team, they manage seven investment vehicles together, with solid long-term prospects. The strategies average a Silver asset-weighted average Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. 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.

Still, with such a short track record, it is too early to draw a conclusion based on performance. In the past twelve months, this share class has lost 5.7%, compared with the 2.8% loss of the category benchmark, the MSCI China Index, for the same period. But during that time, it outperformed the category average's 8.0% loss for the period.

This share class lands in the cheapest quintile of its Morningstar Category. Its affordable fee, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class has high potential to deliver positive alpha versus its category benchmark, leading to its Morningstar Medalist Rating of Silver.