An upgrade in People Pillar rating is the primary driver of JPMorgan Active Small Cap Value ETF's upgrade to a Morningstar Medalist Rating of Silver from Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. 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

Selective Insurance Group

Encompass Health

Primo Water

Matador Resources

Chord Energy Corp

Independent Bank

Safety Insurance

ChampionX

Iridium Communications

H.B. Fuller

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

The most important driver of the rating is the parent firm's five-year risk-adjusted success ratio of 56%. 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. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also supports the process. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy owns more growth stocks than its peers in the Small Value Morningstar Category. But in terms of market capitalization, it is on par with peers. Examining additional factor exposure, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy also has had a position favoring high-quality stocks in recent years, which could contribute to higher downside risk protection. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it endure downturns better than Morningstar Category peers. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. In recent months, the strategy also had less Volatility factor exposure than 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 by 2.5 percentage points in terms of assets compared with the category average, and its real estate allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and technology, with consumer cyclical underweighting the average portfolio by 3.9 percentage points of assets and technology similar to the average. The portfolio is composed of 115 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 14.7% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 28.9%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 13% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Jpmorgan Active Small Cap Value ETF earns an Above Average People Pillar rating. The team is backed by Lawrence E. Playford, the longest-tenured manager on the strategy, who provides over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 4.0 stars, demonstrating excellent risk-adjusted performance relative to category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 11 years of listed portfolio management experience.  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.

People

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.
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.

Parent

JPMorgan Active Small Cap Value ETF

JPSV is an actively managed, non-transparent ETF that provides exposure to US small-cap value stocks. The fund utilizes the Natixis/NYSE proxy portfolio model.

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