JPMorgan Active Small Cap Value ETF JPSV

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

The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. The strategy’s management team earns an Above 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 Active Small Cap Value ETF earns an Above Average Process Pillar rating.

The most important driver of 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 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 noteworthy 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 owns more growth stocks than its peers in the Small Value Morningstar Category. But in terms of size exposure, it is similar to the average. Examining additional factor exposure, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy also has had a position favoring high-quality stocks in recent years, which could contribute to higher downside risk protection. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it weather 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. Additionally, this strategy has demonstrated a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. 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 real estate by 2.5 percentage points in terms of assets compared with the category average, and its financial services allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and technology, with consumer cyclical underweighting the average portfolio by 4.2 percentage points of assets and technology similar to the average. The strategy owns 117 securities and is diversified among those holdings. In its most recent portfolio, 14.7% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category average's 29.3%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 13% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

The team is backed by Lawrence E. Playford, the longest-tenured manager on the strategy, who provides over 25 years of listed portfolio management experience. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 11 years of listed portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between$ 100,000 and$ 500,000. An investment of more than$ 1 million would be ideal to align managers' interests with those of the fund'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.

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.

However, its track record is too short to draw a meaningful conclusion. In the past twelve months, this share class has returned 15.8%, compared with the 14.0% return of the category benchmark, the Russell 2000 Value Index, for the same period. And during that time, it mirrored its average peer's return.

This share class sits in the cheapest quintile of its Morningstar Category. Its competitive expense ratio, taken together with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha relative to its category benchmark, explaining its Morningstar Medalist Rating of Silver.