JPMorgan BetaBuilders US Equity ETF BBUS

The portfolio maintains a 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 volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. 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 US Equity ETF earns an Above Average Process Pillar rating.

The largest 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. Excellent risk-adjusted performance also contributes to the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period.

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

The investment seeks investment results that closely correspond, before fees and expenses, to the performance of the Morningstar® US Target Market Exposure IndexSM. The underlying index is a free float adjusted market capitalization weighted index which consists of equity securities primarily traded in the United States. The underlying index targets 85% of those stocks by market capitalization, and and primarily includes large- and mid-cap companies. The fund will invest at least 80% of its assets in securities included in the underlying index.

The portfolio has allocations in its top two sectors, technology and communication services, that are similar to the category. The sectors with low exposure compared to category peers are industrials and healthcare; however, the allocations are similar to the category. The strategy owns 574 securities and its assets are more dispersed than peers in the category. In particular, 31.6% of the strategy's assets are concentrated in the top 10 fund holdings, as opposed to the category’s 51.0% average. And in closing, 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.

There are four managers listed on the fund: Alex Hamilton, Oliver Furby, Nicholas D’Eramo, Michael Loeffler. The team is well equipped, with an average of 12 years of portfolio management experience. Together, they manage a total of eight strategies, with a Silver asset-weighted algorithmically-assigned average Morningstar Medalist Rating, indicating the potential 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 three years, it beat the category index, the Russell 1000 Index, by an annualized 32 basis points, and outperformed its average peer by 1.1 percentage points. And more importantly, when extended to a longer time frame, the strategy outpaced the index. On a five-year basis, it outperformed the index by an annualized 19 basis points.

The risk-adjusted performance only continues to make a case for this fund. The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing five-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. However, the share class proved itself ineffective as it was unable to generate alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This fund is in the cheapest quintile of its Morningstar Category. Its attractive fee, taken together with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha against the lesser of its median category peer or the category benchmark, explaining its Morningstar Medalist Rating of Silver.