JPMorgan ActiveBuilders EM Eq ETF earns an Above Average Process Pillar rating.
The main driver of the rating is the parent firm's five-year risk-adjusted success ratio of 59%. 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. The firm's five-year retention rate of 83% also strengthens the process. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.
This strategy, over time, has opted for smaller market-cap companies, compared with others 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. Looking at additional factor exposure, 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 experience a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The managers have also tended to overweight yield during recent years, shown by the portfolio's high exposure to dividends or buybacks. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. Additionally, the strategy has constantly maintained a defensive tilt, with exposure to high-quality stocks. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. In recent months, however, the strategy had less Quality factor exposure 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 has allocations in its top two sectors, consumer defensive and financial services, that are similar to the category. The sectors with low exposure compared to category peers are basic materials and healthcare; however, the allocations are similar to the category. The portfolio is composed of 526 holdings and is diversified among those holdings. In its most recent portfolio, 21.2% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category average's 25.7%. And finally, 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.