JPMorgan US Value Factor ETF earns a High Process Pillar rating.
The most significant 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. Respectable risk-adjusted performance also influences the rating. 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 superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, supports the rating as well.
This strategy tends to pick smaller market-cap companies compared with the average fund in its peer group, the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it is similar. Looking at additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. 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 endure 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. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. In this month, the strategy also had more exposure to the Volatility 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 technology and consumer cyclical relative to the category average by 15.5 and 7.0 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and energy, underweight the average by 9.0 and 4.1 percentage points of assets, respectively. The strategy owns 359 securities and its assets are more dispersed than peers in the category. In particular, 16.9% of the strategy's assets are concentrated in the top 10 fund holdings, compared to the category’s 28.0% average. 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.