JPMorgan US Momentum Factor ETF earns an Above Average Process Pillar rating.
The main driver of 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 excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also influences the rating. Lastly, the process is limited by the fund's weak long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.
This strategy tends to hold smaller, deeper value companies compared with its average peer in the Large Growth Morningstar Category. Looking at additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also been exposed to liquid stocks during these years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. In addition, this strategy has taken on exposure to high-momentum stocks in these years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In this month, the strategy also had more exposure to the Momentum 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 industrials and energy relative to the category average by 7.2 and 3.4 percentage points, respectively. The sectors with low exposure compared to category peers are technology and communication services, underweight the average by 10.6 and 5.0 percentage points of assets, respectively. The strategy owns 278 securities and is diversified among those holdings. In its most recent portfolio, 19.4% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category’s 56.1% average. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.