JPMorgan Sustainable Infrastructure ETF BLLD

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

The strategy's strong management team drives the fund's Above Average People Pillar rating. The team, however, could invest more of their own money alongside shareholders. The strategy's effective investment approach earns an Above Average Process Pillar rating. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Sustainable Infrastructure ETF earns an Above Average Process Pillar rating.

The main contributor to 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 parent firm's five-year risk-adjusted success ratio of 55% also influences the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. 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 has tended to hold more growth stocks than others in the Infrastructure Morningstar Category. But in terms of market capitalization, it is on par with peers. Examining additional factor exposure, this strategy has consistently overweighted the volatility factor compared with Morningstar Category peers over the last few years, meaning it invests in stocks with a history of the higher standard deviation of returns. Such exposure tends to pay off when markets are hot and to be costly when they are not. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. This strategy also has had lower yield exposure than peers over these years; its portfolio has held fewer stocks with high dividend or buyback yields. This is demonstrated by the portfolio's low exposure to dividends or buybacks. While companies with high yields provide consistent income payments, they may cut payouts if their earnings fall. Similarly, in recent months, the strategy also had less exposure to the Yield factor than peers. Given the high trading volume of holdings, this fund also holds highly liquid assets. 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 suffer from a significant loss. In recent months, however, the strategy had less Liquidity 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 is overweight in real estate by 36.0 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and utilities, underweight the average by 15.4 and 9.4 percentage points of assets, respectively. The strategy owns 68 securities and is relatively top-heavy. Of the strategy's assets, 33.7% are concentrated within the top 10 holdings, as opposed to the typical peer's 28.1%. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.

The most notable contributor to the rating is its parent firm's five-year success ratio of 55%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The combined average five-year excess return of each manager also supports the rating. It shows that the funds they manage have surpassed the average manager. Lastly, the rating is limited by the number of months that the management team has been running this vehicle together. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.

The team is backed by Sara Bellenda, the longest-tenured manager on the strategy, who brings 19 years of listed portfolio management experience. The team is small but adequately equipped, with two other supporting listed managers. Together, the three boast nine years of average listed portfolio management experience. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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 twelve months, this share class has returned 8.8%, compared with the 12.5% return of the category benchmark for the same period. But during that time, it outperformed the category average's 8.6% return for the period.

It is good practice to weigh them heavily in any investment evaluation. This share class is in the cheapest quintile of its Morningstar Category. Its low fee, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class has high potential to deliver positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Silver.