JPMorgan U.S. Tech Leaders ETF JTEK

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

The strategy’s management team earns an Above Average People Pillar rating. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight liquidity exposure and 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'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.

Jpmorgan U.S. Tech Leaders ETF earns an Average Process Pillar rating.

The primary contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 56%. 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 parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also influences the rating. Lastly, the process is limited by the experience of the management team, which averages five years at this fund.

This strategy tends to hold smaller, higher-growth companies than its average peer in the Technology Morningstar Category. Analyzing additional factors, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility 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 communication services and consumer cyclical relative to the category average by 4.1 and 3.6 percentage points, respectively. The sectors with low exposure compared to category peers are technology and industrials, underweight the average by 4.4 and 2.9 percentage points of assets, respectively. The portfolio is composed of 59 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 38.0% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 52.4%.

Joseph Wilson, the longest-tenured manager, has seven years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 4.1 stars, demonstrating excellent risk-adjusted performance versus category peers. Joseph Wilson draws on only one other listed manager. Together, they are adequately equipped with five years of average listed portfolio management experience. As a team, they manage three investment vehicles together, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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.

However, its track record is too short to draw a meaningful conclusion. In the past five months, this share class has returned 38.2%, compared with the 34.1% return of the category benchmark, the Morningstar US Technology Index, for the same period. During that time, it also outperformed the category average's 33.2% return for the period.

This share class lands in the second-cheapest quintile of its Morningstar Category. Its low 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 Medalist Rating of Bronze.