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JPMorgan BetaBuilders Japan ETF BBJP

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Morningstar’s Analysis BBJP

Medalist rating as of .

JPMorgan BetaBuilders Japan 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 BetaBuilders Japan 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 effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in volatility exposure and liquidity exposure compared with category peers. Low volatility exposure is attributed to stocks with a lower standard deviation of returns. And a low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. 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 index on a risk-adjusted basis over the long term.

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Morningstar Manager Research

Process

High

JPMorgan BetaBuilders Japan ETF earns a High Process Pillar rating.

The most notable 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. The parent firm's five-year risk-adjusted success ratio of 57% also contributes to 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 respectable success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, supports the rating as well.

The investment strategy as stated in the fund's prospectus is:

The investment seeks investment results that closely correspond, before fees and expenses, and to the performance of the Morningstar® Japan Target Market Exposure IndexSM. The fund will invest at least 80% of its assets in securities included in the underlying index. The underlying index is a free float adjusted market capitalization weighted index which consists of stocks traded primarily on the Tokyo Stock Exchange or the Nagoya Stock Exchange. The fund may invest up to 20% of its assets in exchange-traded futures and forward foreign currency contracts to seek performance that corresponds to the underlying index.

The portfolio has allocations in its top two sectors, healthcare and communication services, that are similar to the category. The sectors with low exposure compared to category peers are basic materials and consumer defensive, with basic materials underweighting the average portfolio by 3.1 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 252 holdings and is quite concentrated. In particular, 26.4% of the strategy's assets are housed within the top 10 holdings, compared to the category average of 21.9%. And finally, in terms of portfolio turnover, on a year-over-year basis, 3% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Rated on Published on

JPMorgan’s team is comparable to peers, resulting in an Average People Pillar rating.

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Morningstar Manager Research

People

Average

There are four managers listed on the fund: Alex Hamilton, Oliver Furby, Nicholas D’Eramo, Michael Loeffler. Experience on the team is abundant, with 12 years of average portfolio management experience. Together, they manage a total of eight strategies, with a Silver asset-weighted algorithmically-assigned average Morningstar Medalist Rating, indicating the 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 challenging short-term track record.

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Morningstar Manager Research

Performance

Narrowing in on the past three-year period, it trailed the category index, the MSCI Japan Index, by an annualized 32 basis points, and underperformed its average peer by 2.4 percentage points. And more importantly, when looking across a longer horizon, the strategy was bested by the index. On a five-year basis, it trailed the index by an annualized 41 basis points.

Even 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 five-year period. This subpar risk-adjusted performance has not resulted in higher volatility, as measured by their standard deviation, which is close to the benchmark. However, the share class proved itself effective by generating positive 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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Low-cost investments routinely outperform high-cost investments.

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Morningstar Manager Research

Price

Thus, assessing cost is a critical step in any investment evaluation. This fund lands in the cheapest quintile of its Morningstar Category. Its affordable expense ratio, paired with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha against the lesser of its median category peer or the category benchmark, leading to its Morningstar Medalist Rating of Gold.

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Portfolio Holdings BBJP

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 25.7
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

Toyota Motor Corp

5.71 655.5 Mil
Consumer Cyclical

Mitsubishi UFJ Financial Group Inc

2.93 336.4 Mil
Financial Services

Sony Group Corp

2.45 281.5 Mil
Technology

Hitachi Ltd

2.43 279.3 Mil
Industrials

Tokyo Electron Ltd

2.42 277.5 Mil
Technology

Sumitomo Mitsui Financial Group Inc

2.04 234.6 Mil
Financial Services

Keyence Corp

1.98 227.1 Mil
Technology

Mitsubishi Corp

1.97 225.7 Mil
Industrials

Recruit Holdings Co Ltd

1.92 220.2 Mil
Communication Services

Shin-Etsu Chemical Co Ltd

1.87 214.7 Mil
Basic Materials