JPMorgan Climate Change Solutions ETF TEMP

A strong management team and sound investment process underpin JPMorgan Climate Change Solutions ETF's Morningstar Quantitative Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.

The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. The portfolio has overweighted liquidity exposure and has an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The strategy is part of a first-rate parent, as shown by a high lineup success ratio and overall reasonable fees. These attributes support its Above Average Parent Pillar rating.

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. JPMorgan Climate Change Solutions ETF earns an Above Average Process Pillar rating.

This strategy leans toward smaller, deeper value companies than its average peer in the Global Large-Stock Growth Morningstar Category. Examining additional factor exposure, this fund tilts toward stocks with high trading volumes. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. The strategy is also historically more exposed compared with Morningstar Category peers. This strategy also tilts in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity. Though it may trail peers during an economic boom, this orientation contributes to helping it weather periods of economic stress better. But when compared with category peers, the strategy historically has had less exposure. Additionally, this strategy has exhibited a tilt toward high-volatility stocks, meaning companies that have a higher historical standard deviation of returns. Volatility exposure tends to pay off most prominently when markets are hot. And the portfolio has more 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 industrials and utilities relative to the average peer in its category by 35.9 and 10.4 percentage points in terms of assets, respectively. The sectors with low exposure compared to their category peers are healthcare and financial services, underweight the average by 18.2 and 15.2 percentage points of assets, respectively. The portfolio is composed of 68 holdings and is rather concentrated at the top. Specifically, 34.9% of the fund’s assets are housed within the top 10 holdings, compared with the category’s 21.3% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 32% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Despite managers' lack of personal investments, JPMorgan Climate Change Solutions ETF benefits from a team of managers with a wealth of experience. As the latter outweighs the former, the strategy earns an Above Average People Pillar rating. The team is backed by Francesco Conte, the longest-tenured manager on the strategy, who provides over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.3 stars, demonstrating, in aggregate, that they do not provide value for investors. Francesco Conte has an experienced backdrop of support. The three listed managers boast 20 years of average portfolio management experience. As a team, they manage five investment vehicles together, with a Silver asset-weighted average combined Morningstar Analyst and Quantitative Rating, indicating the potential to deliver positive alpha in aggregate. 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 was incepted on December 13, 2021, and has shown strong initial performance. However, with such a narrow time frame, it would be misleading to make a sweeping conclusion. Since then, this share class has lost 4.3%, compared with the category benchmark's, MSCI ACWI Growth Index’s, 14.5% loss for the same period. During that time, it also outperformed the category average's 11.6% loss for the period.

Low-cost investments routinely outperform high-cost investments. Thus, assessing cost is a critical step in any investment evaluation. This share class lands in the cheapest quintile of its Morningstar Category. Its attractive expense ratio, paired with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha compared with its category benchmark, explaining its Morningstar Quantitative Rating of Silver.