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JPMorgan US Value Factor ETF JVAL

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Morningstar’s Analysis JVAL

Medalist rating as of .

JPMorgan US Value Factor ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Gold.

Our research team assigns Gold ratings to strategies that they have the most conviction will outperform a relevant index, or most peers, over a market cycle on a risk-adjusted basis.

JPMorgan US Value Factor ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Gold.

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Morningstar Manager Research

Summary

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

The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The strategy’s management team earns an Average People Pillar rating. 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.

Rated on Published on

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.

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Morningstar Manager Research

Process

High

JPMorgan US Value Factor ETF earns a High Process Pillar rating.

The predominant 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. Noteworthy 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% supports 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 noteworthy success ratio suggests that this firm does well for investors and that this fund may benefit from that.

This strategy targets smaller plays than its peers’ average in the Large Value Morningstar Category. But in terms of investment style, it is on par with peers. Analyzing additional factors, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to suffer from a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity, during these years. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it weather 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. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than 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 15.2 and 7.5 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and energy, underweight the average by 9.0 and 4.0 percentage points of assets, respectively. The portfolio is composed of 357 holdings and its assets are more dispersed than peers in the category. In particular, 16.7% of the fund’s assets are concentrated in the top 10 fund holdings, as opposed to the category average's 27.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 26% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Rated on Published on

JPMorgan’s team is good but unexceptional, earning the strategy an Average People Pillar rating.

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Morningstar Manager Research

People

Average

There are four managers listed on the fund: Joe Staines, Yegang(Steven) Wu, Yazann Romahi, Natalia Zvereva. Together, they manage a total of six strategies, with a Gold asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.

Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Rated on Published on

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

Associate Director Emory Zink

Emory Zink

Associate Director

Parent

Above Average

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.

Rated on Published on

This share class has a commendable short-term track record.

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Morningstar Manager Research

Performance

Narrowing in on the past three-year period, it beat the category index, the Russell 1000 Value Index, by an annualized 1.2 percentage points, and outperformed the category average by 35 basis points. And more importantly, when extended to a longer time frame, the strategy surpassed the index. On a five-year basis, it outperformed the index by an annualized 2.5 percentage points.

The risk-adjusted performance only continues to make a case for this fund. The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing five-year period. Often, higher returns are associated with higher risk. This strategy is no exception, with a standard deviation of 20.7% exceeding the benchmark's 18.8%. However, 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.

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Fees compound over time and reduce returns, making it critical for investors to minimize expenses.

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Morningstar Manager Research

Price

This share class is in the cheapest quintile of its Morningstar Category. Its low fee, considered jointly 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 Medalist Rating of Gold.

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Portfolio Holdings JVAL

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 17.6
Top 10 Holdings
% Portfolio Weight
Market Value USD
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