JPMorgan Diversified Return EMkts Eq ETF earns a High Process Pillar rating.
The most substantial 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. Strong 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 five-year risk-adjusted success ratio of 56% strengthens the process. The measure indicates the percentage of a firm's funds that survived and surpassed their respective category's median Morningstar Risk-Adjusted Return for the period. Their compelling success ratio suggests that this firm does well for investors and that this fund may benefit from that.
This strategy leans toward smaller, more value-oriented companies than its average peer in the Diversified Emerging Mkts Morningstar Category. Examining additional factor exposure, 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 connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. 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 6.5 and 5.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 18.3 and 4.3 percentage points of assets, respectively. The portfolio is composed of 550 holdings and is less top-heavy than peers. Specifically, 10.2% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the category’s 25.4% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 33% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.