JPMorgan Diversified Return EMkts Eq ETF earns a High Process Pillar rating.
The largest contributor to 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. Noteworthy risk-adjusted performance also bolsters the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, influences the rating as well.
This strategy leans toward smaller, more undervalued companies compared with its average peer in the Diversified Emerging Mkts Morningstar Category. Analyzing additional factors, this strategy has continually had more high-yield exposure than the Morningstar Category average during recent years, with the portfolio holding more stocks with high dividend or buyback yields. 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 recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward low-volatility stocks in recent years, meaning companies with a lower historical standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. Nevertheless, the fund's Quality exposure was in line with peers in the latest month. 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 utilities and industrials relative to the category average by 6.7 and 6.0 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 18.9 and 4.4 percentage points of assets, respectively. The strategy owns 546 securities and its assets are more dispersed than peers in the category. In particular, 10.0% of the strategy's assets are concentrated in the top 10 fund holdings, compared to the category average's 25.9%. And in closing, in terms of portfolio turnover, this fund trades more frequently than its average peer, potentially racking up additional expenses for investors and creating a drag on performance.