JPMorgan USD Emerging Mkts Svr Bd ETF JPMB

JPMorgan USD Emerging Mkts Svr Bd ETF’s strong process and parent firm support this strategy's Morningstar Quantitative Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.

The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in AAA rated bonds and an overweight in government bonds compared with category peers. The strategy has a solid parent that earns an Above Average Parent Pillar rating. This firm has had a favorable lineup success ratio and overall low fees. Finally, the team managing the passive strategy earns the strategy an Average People Pillar rating.

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. JPMorgan USD Emerging Mkts Svr Bd ETF earns a High Process Pillar rating.

Compared with other funds in the Emerging Markets Bond Morningstar Category, this fund consistently is sensitive to interest-rate changes. Opening the analysis to additional factors, the portfolio, over time, has displayed three biases whether toward or away from certain fixed-income instruments. First, managers have shown a consistent large underweight position on AAA rated bonds compared to peers. Additionally, the fund has exhibited a notable sector bias toward government bonds. And finally, the fund leans meaningfully toward debt with 20- to 30-year maturities.

This strategy has a modest 5.0% 12-month yield, lower than its average peer's 5.7%. In addition, it has a 6.4% 30-day SEC yield (a measure similar to yield-to-maturity). While a lower yield may deliver less income, it also tends to indicate lower credit risk. Yet that's not the case here. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated BB.

JPMorgan’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There are three managers listed on the fund: Naveen Kumar, Eric Isenberg, Niels Schuehle. Together, they manage a total of three strategies, with solid long-term prospects. The strategies average a Gold asset-weighted combined Morningstar Analyst and Quantitative Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.

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 cohorts globally and a diverse set of 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.

It is imperative to evaluate fees, which erode expected returns. This share class is in the cheapest quintile of its Morningstar Category. Its attractive fee, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class should be able to deliver positive alpha relative to its category benchmark, explaining its Morningstar Quantitative Rating of Gold.