JPMorgan Divers Ret US Mid Cp Eq ETF earns a High Process Pillar rating.
The main driver of 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. The parent firm's five-year risk-adjusted success ratio of 57% also supports the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's strong risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, supports the process as well.
This strategy targets deeper value plays than its peers’ average in the Mid-Cap Blend Morningstar Category. But in terms of size exposure, it is similar to the average. Examining additional factor exposure, this strategy has continually underweighted stocks that have a lower standard deviation of returns compared with Morningstar Category peers over the past few years. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. In the latest month, the strategy was also less exposed to the Volatility factor compared with Morningstar Category peers. This strategy has also displayed a tendency to hold more companies with high dividend or buyback yields than peers over recent years. 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. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. Additionally, this strategy has tilted toward illiquid stocks during these years, evidenced by holding companies with relatively lower trading volumes than peers. 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 recent months, the strategy also had less Liquidity 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 utilities and consumer defensive relative to the category average by 6.0 and 4.6 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and technology, underweight the average by 7.4 and 5.8 percentage points of assets, respectively. The portfolio is positioned across 361 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 4.9% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 15.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 24% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.