JPMorgan International Growth ETF JIG

The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.

The strategy’s management team earns an Above Average People Pillar rating. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable underweight position in liquidity exposure and has an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan International Growth ETF earns an Average Process Pillar rating.

The leading factor in the rating is the firm's retention rate of the firm's portfolio managers, which is 82% over the timeframe for which data is available, up to five years. The size of the portfolio management team also reinforces the process. With three portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 55%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

This strategy tends to hold larger, more growth-oriented companies compared with its average peer in the Foreign Large Growth Morningstar Category. Analyzing additional factors, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. 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, the portfolio has tended to underweight yield, as shown in its lower exposure to companies that pay dividends or buy back shares than peers over these years. This is demonstrated by the portfolio's low exposure to dividends or buybacks. While companies with high yields provide consistent income payments, they may cut payouts if their earnings fall. In recent months, the strategy also had less Yield factor exposure than 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 consumer cyclical and communication services relative to the category average by 6.0 and 2.7 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and financial services, underweight the average by 4.0 and 3.9 percentage points of assets, respectively. The portfolio is positioned across 80 holdings and is relatively concentrated. Specifically, 31.7% of the strategy's assets are housed within the top 10 holdings, compared with the typical peer's 19.2%. 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.

Thomas Murray, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of listed portfolio management experience. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 18 years of listed portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between$ 100,000 and$ 500,000. An investment of more than$ 1 million would be ideal to align managers' interests with those of the fund's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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

Over the past two years, it beat the category index, the MSCI ACWI ex USA Growth Index, by an annualized 1.6 percentage points, but matched the category average. Although more importantly, when widening the time horizon, the strategy was bested by the index. On a four-year basis, it underperformed the index by an annualized 86 basis points.

When adjusting for risk, the fund does not hold up. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing three-year period. In addition to its subpar risk-adjusted performance, the strategy also took on elevated risk, as measured by a higher standard deviation, 20.7%, than the benchmark, 18.1%. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class is within the cheapest quintile of its Morningstar Category. Its affordable expense ratio, taken together with the fund’s People, Process, and Parent Pillars, suggests that this share class has high potential to deliver positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Bronze.