JPMorgan BetaBuilders Dev APAC ex-JpnETF BBAX

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

The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and an overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. 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 BetaBuilders Dev APAC ex-JpnETF earns a High Process Pillar rating.

The primary contributor to the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. This fund tracks an index, which also increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Excellent risk-adjusted performance also supports the rating, 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, to the performance of the Morningstar® Developed Asia Pacific ex-Japan Target Market Exposure IndexSM. The fund will invest at least 80% of its assets in securities included in the underlying index. The underlying index targets 85% of the stocks traded on the primary exchanges in each country or region by market capitalization, and and primarily includes large-and mid-cap companies.

The portfolio is overweight in financial services and basic materials relative to the category average by 16.9 and 8.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 22.9 and 10.5 percentage points of assets, respectively. The strategy owns 118 securities and is relatively top-heavy. Of the strategy's assets, 46.7% are concentrated within the top 10 holdings, as opposed to the typical peer's 30.8%. And in closing, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

There are three managers listed on the fund: Alex Hamilton, Nicholas D’Eramo, Michael Loeffler. Experience on the team is abundant, with 14 years of average portfolio management experience. Together, they manage a total of eight strategies, with a Silver asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate. The team has lacked continuity recently, with Oliver Furby leaving in the last two months, detracting from its rating. Even though it is a passive fund, high turnover can still hinder the effectiveness of the investment process.

Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

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.

Over the past three years, it beat the category index, the MSCI All Countries Far East ex Japan Index, by an annualized 7.3 percentage points, and outperformed the category average by 4.8 percentage points. And more importantly, when extended to a longer time frame, the strategy outpaced the index. On a five-year basis, it led the index by an annualized 2.4 percentage points.

The risk-adjusted performance only continues to make a case for this fund. The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing five-year period. Often, higher returns are associated with more risk. However, this strategy stayed in line with the benchmark's standard deviation. However, 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.

This fund lands in the cheapest quintile of its Morningstar Category. Its low fee, taken together with the fund’s People, Process, and Parent Pillars, suggests that this share class has high potential to deliver positive alpha relative to the lesser of its median category peer or the category benchmark, leading to its Morningstar Medalist Rating of Gold.