JPMorgan US Value Factor ETF earns a High Process Pillar rating.
The primary contributor to 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. Strong risk-adjusted performance also bolsters the process. This can be seen in 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. The parent firm's strong risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, contributes to the process as well.
This strategy, over time, has preferred smaller market-cap companies, compared with others in the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Examining additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past 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 also has tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity, during these years. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it endure downturns better than Morningstar Category peers. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such exposure tends to pay off when markets are hot and to be costly when they are not. In this month, the strategy also had more exposure to the Volatility factor over 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 technology and consumer cyclical relative to the category average by 15.9 and 7.2 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and energy, underweight the average by 8.9 and 4.8 percentage points of assets, respectively. The portfolio is composed of 358 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 17.4% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category’s 28.0% average. And in closing, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.