A sound investment process and strong management team underpin JHancock Multifactor Small Cap ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in momentum exposure and an overweight in liquidity exposure compared with category peers. Momentum is the premise that stocks that have recently outperformed will continue to do so. With low momentum exposure, the portfolio is holding stocks that managers believe to be undervalued. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The strategy’s management team earns an Above 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.

Analyst Rating

Crocs

Abercrombie & Fitch

Generac Holdings

Sprouts Farmers Markets

Cognex

Alcoa

OGE Energy

Allegheny Technologies

Arrow Electronics

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. JHancock Multifactor Small Cap ETF earns an Above Average Process Pillar rating. 

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

 This strategy does not differentiate itself from its Small Blend category peers in terms of size and style exposure. Analyzing additional factors, this strategy has consistently had low exposure to momentum stocks in the past few years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. In the latest month, the strategy was also less exposed to the Momentum factor compared with Morningstar Category peers. This strategy has also exhibited a tilt towards more high-liquid assets over peers in recent years, evidenced by consistently holding companies with relatively higher trading volumes. 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 experience a significant loss. Compared with category peers, however, the strategy had less Liquidity factor exposure in the latest month. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield 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 financial services and consumer cyclical relative to the category average by 2.7 and 2.5 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and consumer defensive, with healthcare underweighting the average portfolio by 3.8 percentage points of assets and consumer defensive similar to the average. The portfolio is composed of 265 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 6.2% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category’s 24.4% average.

Above Average

Process

JHancock Multifactor Small Cap ETF benefits considerably from its team, earning it an Above Average People Pillar rating. There are four managers listed on the fund: Joseph Hohn, Rita Chen, Casey Baum, Andres Torres. Together, they manage a total of five strategies, with a Silver asset-weighted algorithmically-assigned average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate.  

 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.

People

Manulife Financial Corp has revamped its wealth- and asset-management business off the long-term strength of its successful U.S. unit, meriting an Above Average Parent rating. 

One of Canada’s Big Three life insurance companies, Manulife operates primarily in Canada, the United States, and Asia, with the bulk of assets in the U.S. The firm united its investment and wealth-management groups into a single, global segment in 2017 and 2018 and showcased it as a high-potential business. Since then, the group has restructured to mix three regional heads—U.S. & Europe, Asia, and Canada—with three global leaders segmented by channel: Retail, Retirement, and Institutional.

Manulife has entrusted this initiative to key individuals from its U.S. outfit, John Hancock Investments. For instance, Andy Arnott recently shifted from focusing on the U.S. and European unit to head up the firm’s global retail efforts. Leadership hopes this structure will allow it to leverage successful initiatives in its distinct regional markets.

John Hancock’s manager research team has long prioritized best-in-class managers regardless of firm affiliation. While much of the firm’s fixed-income strategies are run by Manulife teams globally, external managers dominate the firm’s equity lineup in the U.S. In its home market of Canada, Manulife’s internal teams, which boast strengths and weaknesses, manage most of the firm’s offerings, though the firm also has a strategic partnership with investment stalwart Mawer.

Parent

John Hancock Multifactor Small Cap ETF

JHSC tracks an index of US small-cap stocks selected by relative price and profitability. Securities are weighted by multiple factors relative to their sector peers.

The John Hancock Multifactor Small Cap ETF (JHSC) was launched on 11/08/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.

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Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the John Hancock Multifactor Small Cap ETF (JHSC) is a passively managed exchange traded fund launched on 11/08/2017.

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