JPMorgan ActiveBuilders Intl Eq ETF JIDA

A sound investment process and strong management team underpin JPMorgan ActiveBuilders Intl Eq ETF's Morningstar Quantitative Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.

The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in momentum exposure and yield exposure compared with category peers. Momentum exposure is attributed to holding stocks currently on a winning streak and selling those that are on a downtrend. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. This management team's high retention rate earns it an Above Average People Pillar rating. The strategy belongs to a strong asset-management firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a high lineup success ratio and overall reasonable fees.

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. JPMorgan ActiveBuilders Intl Eq ETF earns a High Process Pillar rating.

This strategy tends to hold larger, more value-oriented companies compared with its average peer in the Foreign Large Blend Morningstar Category. Analyzing additional factors, this strategy has exposure to high-momentum stocks. Momentum strategies wager that market outperformers will continue to outperform, and laggards will continue to lag. Higher exposure to the former could mean the managers are overweighting stocks on winning streaks. The strategy is also historically more exposed compared with Morningstar Category peers. This strategy has also displayed a tendency to hold more companies 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 ever force their underlying businesses to cut their dividends. And compared with category peers, the strategy historically has had more exposure. Additionally, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. The portfolio has less exposure than its Morningstar Category 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 financial services by 3.4 percentage points in terms of assets compared with the average portfolio in the category, and its energy allocation is similar to the category. The sectors with low exposure compared to their category peers are consumer cyclical and real estate; however, the allocations are similar to the average category portfolio. The portfolio is positioned across 315 holdings and is quite concentrated. More concretely, 20.7% of the portfolio's assets are housed within the top 10 holdings, compared to the category average of 13.9%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 28% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Despite its managers' lack of personal investments, JPMorgan ActiveBuilders Intl Eq ETF benefits from a normal rate of portfolio manager turnover. As the latter outweighs the former, the strategy earns an Above Average People Pillar rating. Nicholas Horne, the longest-tenured manager on the strategy, boasts 16 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.4 stars, demonstrating encouraging risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 11 years of portfolio management experience. The fund has had about average portfolio manager turnover compared to other teams. Long-term stability strengthens a team's rating as it tends to support positive results. However, the most recent documented departure was 16 months ago. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of 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.

This strategy's share class is young, incepted on July 7, 2021, but so far has demonstrated positive initial performance. That said, it is too early to have a strong opinion on its prospects. Since then, this share class has lost 3.6%, compared with the category benchmark's, MSCI ACWI ex USA Index’s, 5.7% loss for the same period. During that time, it also outperformed the category average's 5.3% loss for the period.

Fees are one of the most predictive factors of future performance. This share class is within the cheapest quintile of its Morningstar Category. Its competitive expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha versus its category benchmark, leading to its Morningstar Quantitative Rating of Gold.