JPMorgan BetaBuilders MSCI US REIT ETF earns a High Process Pillar rating.
The leading factor in 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 59% also bolsters the process. 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. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. Excellent risk-adjusted performance also contributes to the process, as shown by the fund's five-year alpha calculated relative to the category index, which suggests the process was successful over that period.
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 MSCI U.S. REIT Custom Capped Index. 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-cap weighted index designed to measure the performance of U.S. equity real estate investment trust ("REIT") securities. The fund may invest up to 20% of its assets in exchange-traded futures to seek performance that corresponds to the underlying index.
The portfolio is overweight in real estate by 2.6 percentage points in terms of assets compared with the category average, and its consumer defensive allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and financial services; however, the allocations are similar to the category. The strategy owns 126 securities and is less top-heavy than peers. Specifically, 46.7% of the fund’s assets are concentrated within the top 10 fund holdings, as opposed to the typical peer's 61.8%. And in closing, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.