JPMorgan Sustainable Municipal Inc ETF JMSI

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

The strategy underwent an entire portfolio management team change less than a year ago, but confidence in the strategy's new leadership drives an Above Average People Pillar rating. The strategy's investment approach stands out 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 A rated bonds and has a significant overweight in cash compared with category peers. 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 Municipal Inc ETF earns an Above Average Process Pillar rating.

The primary 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 57% 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 noteworthy success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the number of months that the management team has been running this vehicle together.

Compared with other funds in the Muni National Interm Morningstar Category, this fund takes on significantly higher credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the average strategy in the category, the managers have been underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, the fund has exhibited a notable sector bias towards cash over the past few years. Compared with category peers, the strategy had more exposure to cash in the most recent month. Finally, during the past few years, the fund leaned towards debt with 10- to 15-year maturities. In this month, the strategy also leaned more towards debt with 10- to 15-year maturities compared with its peers.

This strategy's 12-month yield is 3.2%, higher than its average peer's 2.9%. Plus, its 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return) sits at 3.7%. Higher yields tend to indicate higher credit risk. The portfolio has a lower average credit rating of BBB, compared with the category average's A and 5% of the fund's assets are rated non-investment-grade, compared to its peers' 1%. Strategies with more credit risk may have a higher return, but they are riskier.

Although this strategy was incepted on February 1993, its listed management team joined within the past three years. Therefore, the fund’s historical data is not applicable to the current team.

Note: The People Pillar rating is indirectly assigned by an analyst. At least one of the managers on this fund manages a different product rated by an analyst. The analyst-assigned People Pillar rating(s) for these managers are combined with algorithmic scores for any non-covered managers on a tenure-weighted basis.

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.

Since the new regime's current strategy is not necessarily representative of the past, it is difficult to compare them. The new team took the reins in February 2024 and looking at their performance so far, they have posted notable results. Since the manager change two months ago, the fund lost 0.8% through month-end, matching its average peer's 0.9% loss and outperforming the Bloomberg Barclays Municipal 1-15 Year Bond Index’s 1.0% loss. With this narrow of a time frame with the new team, it is difficult to make a meaningful assessment of the fund’s risk.

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