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JPMorgan ActiveBuilders EM Eq ETF JEMA

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Morningstar’s Analysis JEMA

Medalist rating as of .

JPMorgan ActiveBuilders EM Eq ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze.

Our research team assigns Bronze ratings to strategies they’re confident will outperform a relevant index, or most peers, over a market cycle on a risk-adjusted basis.

JPMorgan ActiveBuilders EM Eq ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze.

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Morningstar Manager Research

Summary

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

The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and yield exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. This management team has a wealth of experience, but still gets an Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

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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

Above Average

JPMorgan ActiveBuilders EM Eq ETF earns an Above Average Process Pillar rating.

The largest contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 55% also influences the rating. 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. Lastly, the process is limited by the number of months that the management team has been running this vehicle together.

This strategy targets smaller plays than its peers’ average in the Diversified Emerging Mkts Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Analyzing additional factors, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past 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 experience 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's portfolio also has had exposure to more stocks with high dividend or buyback yields over peers in these years. Higher-yield stocks can provide steady income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. Compared with category peers, however, the strategy had less Yield factor exposure in the latest month. Additionally, the strategy has constantly maintained a defensive tilt, with exposure to high-quality stocks. Such holdings could cause it to trail peers during economic booms, but help it better withstand busts. In this month, the strategy also had more exposure to the Quality 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 by 3.4 percentage points in terms of assets compared with the category average, and its financial services allocation is similar to the category. The sectors with low exposure compared to category peers are basic materials and healthcare, with basic materials underweighting the average portfolio by 2.7 percentage points of assets and healthcare similar to the average. The strategy owns 536 securities and is similarly diversified as peers, with 26.9% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, this portfolio's holdings turn over more often than comparable products in its peer group, possibly resulting in higher costs for investors and a drag on performance.

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JPMorgan ActiveBuilders EM Eq ETF earns an Average People Pillar rating.

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Morningstar Manager Research

People

Average

The main contributor to the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 3.3 stars. The size of the portfolio management team also supports the rating. With three portfolio managers, the fund is reasonably well-resourced. Lastly, the rating is limited by the combined average five-year excess return of each manager, which suggests that the funds they manage have fallen short of their respective category average.

Anuj Arora, the longest-tenured manager on the strategy, provides strong guidance, bringing forward 22 years of listed portfolio management experience.

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

Over the past year, it trailed the category index, the MSCI Emerging Markets Index, by an annualized 2.8 percentage points, and underperformed its average peer by 4.1 percentage points. And more importantly, when looking across a longer horizon, the strategy's performance looks bleak. On a three-year basis, it underperformed the index by an annualized 1.5 percentage points.

When risk is properly accounted for, the strategy is not any more compelling. The share class failed to beat the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing three-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. Finally, 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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Returns vary from period to period, but expenses are always subtracted.

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Morningstar Manager Research

Price

It is good practice to weigh them heavily in any investment evaluation. This share class lands in the cheapest quintile of its Morningstar Category. Its attractive fee, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class is well-positioned to generate positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Bronze.

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Portfolio Holdings JEMA

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 28.7
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

Taiwan Semiconductor Manufacturing Co Ltd

9.99 106.5 Mil
Technology

Tencent Holdings Ltd

5.06 54.0 Mil
Communication Services

Samsung Electronics Co Ltd

4.45 47.5 Mil
Technology

Infosys Ltd

1.61 17.2 Mil
Technology

Alibaba Group Holding Ltd Ordinary Shares

1.56 16.7 Mil
Consumer Cyclical

Tata Consultancy Services Ltd

1.39 14.8 Mil
Technology

SK Hynix Inc

1.27 13.5 Mil
Technology

ICICI Bank Ltd

1.24 13.3 Mil
Financial Services

NetEase Inc Ordinary Shares

1.09 11.7 Mil
Communication Services

Quanta Computer Inc

1.01 10.7 Mil
Technology