JPMorgan BetaBuilders US Sml Cp Eq ETF earns a High Process Pillar rating.
The leading factor in 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. The parent firm's five-year risk-adjusted success ratio of 57% also strengthens the process. 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 noteworthy success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, supports the rating as well.
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 ®US Small Cap Target Market Exposure Extended IndexSM. The fund will invest at least 80% of its assets in securities included in the index and at least 80% of its assets in the securities of small-capitalization companies. The index consists of equity securities primarily traded in the United States and targets those securities that fall between the 95th and 99th percentiles in market capitalization of the free float adjusted investable universe.
The portfolio is overweight in real estate by 3.0 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and basic materials, with industrials underweighting the average portfolio by 2.9 percentage points of assets and basic materials similar to the average. The portfolio is composed of 830 holdings and is diversified among those holdings. In its most recent portfolio, 4.8% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 24.4%. And finally, 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.