JPMorgan BetaBuilders Intl Eq ETF BBIN

The portfolio maintains a cost advantage over competitors, priced within the lowest 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 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 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 Intl Eq ETF earns an Above Average Process Pillar rating.

The most significant contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons.

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

The investment seeks investment results that closely correspond, before fees and expenses, and to the performance of the Morningstar® Developed Markets ex-North America Target Market Exposure IndexSM. The fund will invest at least 80% of its assets in securities included in the underlying index." The underlying index is a free float adjusted market capitalization weighted index which consists of equity securities from developed countries or regions.

The portfolio has allocations in its top two sectors, healthcare and real estate, that are similar to the category. The sectors with low exposure compared to category peers are technology and energy, with technology underweighting the average portfolio by 3.8 percentage points of assets and energy similar to the average. The portfolio is composed of 780 holdings and is similarly diversified as peers, with 15.5% of portfolio assets concentrated within the top 10 holdings. 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. The team is well equipped, with an average of 14 years of portfolio management experience. Together, they manage a total of eight strategies, with solid long-term prospects. The strategies average a Silver asset-weighted average Morningstar Medalist Rating, indicating a position 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 two-year period, it beat the category index, the MSCI ACWI ex USA Index, by an annualized 4.2 percentage points, and outperformed the category average by 2.3 percentage points. And more importantly, when extended to a longer time frame, the strategy came out ahead. On a four-year basis, it led the index by an annualized 2.2 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 three-year period. However, these returns were accompanied by additional risk, with a standard deviation of 17.9% compared to the benchmark's 16.4%. Finally, the share class proved itself effective by generating positive alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Thus, assessing cost is a critical step in any investment evaluation. This fund is within the cheapest quintile of its Morningstar Category. Its low expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class should be able to deliver positive alpha versus the lesser of its median category peer or the category benchmark, leading to its Morningstar Medalist Rating of Silver.