JPMorgan Small & Mid Cap Enh Eq ETF JMEE

The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive 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 an underweight in momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. 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.

JPMorgan Market Expansion Enh Eq ETF earns an Above Average Process Pillar rating.

The main driver of 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 size of the portfolio management team also supports the process. With four portfolio managers, the fund is reasonably well-resourced. However, 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.

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

The investment seeks to provide investment results that correspond to or incrementally exceed the total return performance of the S&P 1000 Index that tracks the performance of the small- and mid-capitalization equity markets. Under normal circumstances, the fund will hold at least 80% of its assets in stocks in the index. The index is an index which includes stocks of small- and mid-capitalization companies. The fund may use futures contracts to gain or reduce exposure to its index, and maintain liquidity and minimize transaction costs.

The portfolio is overweight in real estate and consumer cyclical relative to the category average by 3.0 and 3.0 percentage points, respectively. The sectors with low exposure compared to category peers are technology and healthcare, underweight the average by 4.1 and 3.3 percentage points of assets, respectively. The strategy owns 586 securities and its assets are more dispersed than peers in the category. In particular, 6.7% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the typical peer's 24.9%. 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.

Phillip D. Hart’s veteran status, with 14 years of listed portfolio management experience, brings a wealth of experience to the table. The team boasts an experienced corps of listed portfolio managers, with three other managers supporting Phillip D. Hart. Together, they average 10 years of listed portfolio management experience. As a team, they manage six investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha in aggregate. The highest personal investment in the fund by any of its managers is between$ 100,000 and$ 500,000. That's on the low side--it would need to be more than$ 1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors.

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.

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

This share class’ quantitatively driven Performance content was not generated because of insufficient data. To generate individualized content, the Medalist Rating quantitative analysis requires sufficient data to generate its framework of “ mental models ” designed to mimic content written by analysts.

Past performance is not predictive of future results, and, therefore, Morningstar Medalist Ratings are not anchored on short-term results and instead focus on long-term risk and return patterns. Performance receives no explicit weighting in Morningstar’s analysis but is referenced as a part of the People, Parent, and Process evaluations.

Thus, assessing cost is a critical step in any investment evaluation. This share class is in the cheapest quintile of its Morningstar Category. Its low fee, paired with the fund’s People, Process, and Parent Pillars, indicates that this share class should be able to deliver positive alpha versus its category benchmark, explaining its Morningstar Medalist Rating of Bronze.