JPMorgan BetaBuilders Intl Eq ETF BBIN

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

The strategy's investment process inspires confidence and earns 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 an underweight in momentum exposure compared with category peers. 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 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 Intl Eq ETF earns an Above Average Process Pillar rating.

The predominant 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.

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

The investment seeks investment results that closely correspond, before fees and expenses, and to the performance of the Morningstar® Developed Markets ex-North America Target Market Exposure IndexSM. The fund will invest at least 80% of its assets in securities included in the underlying index." The underlying index is a free float adjusted market capitalization weighted index which consists of equity securities from developed countries or regions.

The portfolio has allocations in its top two sectors, healthcare and consumer defensive, that are similar to the category. The sectors with low exposure compared to category peers are technology and energy, with technology underweighting the average portfolio by 3.4 percentage points of assets and energy similar to the average. The portfolio is composed of 812 holdings and is about as top-heavy as the category average, with 15.4% of assets in the top 10 holdings. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 5% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

There are four managers listed on the fund: Alex Hamilton, Oliver Furby, Michael Loeffler, Nicholas D’Eramo. Experience on the team is abundant, with 12 years of average portfolio management experience. Together, they manage a total of eight strategies, with solid long-term prospects. The strategies average a Silver asset-weighted algorithmically-assigned average Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.

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.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various global cohorts and diverse asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

Over the past two-year period, it beat the category index, the MSCI ACWI ex USA Index, by an annualized 3.7 percentage points, and outperformed its average peer by 2.1 percentage points. And more importantly, when looking across a longer horizon, the strategy outpaced the index. On a four-year basis, it outperformed the index by an annualized 1.7 percentage points.

The risk-adjusted performance only continues to make a case for this fund. The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing three-year period. Notably, these strong risk-adjusted results have not come with more volatility for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself effective by generating positive 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 lands in the cheapest quintile of its Morningstar Category. Its affordable expense ratio, paired with the fund’s People, Process, and Parent Pillars, indicates that this share class should be able to deliver positive alpha relative to the lesser of its median category peer or the category benchmark, explaining its Morningstar Medalist Rating of Silver.