JPMorgan Market Expansion Enh Eq ETF earns an Above Average Process Pillar rating.
The predominant contributor to 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 57% also bolsters 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 compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.
This strategy prefers more value-oriented stocks compared with the average fund in its peer group, the Small Blend Morningstar Category. But in terms of market capitalization, it is on par with peers. Analyzing additional factors, this strategy has had relatively low exposure to momentum stocks compared with Morningstar Category peers continually in the last few years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. In the latest month, the strategy was also less exposed to the Momentum factor compared with Morningstar Category peers. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, the managers have tended to overweight yield, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield 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 consumer cyclical and real estate relative to the category average by 2.8 and 2.6 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and technology, underweight the average by 4.0 and 3.1 percentage points of assets, respectively. The portfolio is positioned across 606 holdings and is less top-heavy than peers. Specifically, 6.7% of the fund’s assets are concentrated within the top 10 fund holdings, compared to the category average's 24.4%. And in closing, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.