JPMorgan Short Duration Core Plus ETF JSCP

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

The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in B rated bonds and an underweight in debt with over 30-year maturities compared with category peers. The management team's considerable industry experience earns it an Above Average People Pillar rating. 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 Short Duration Core Plus ETF earns an Above Average Process Pillar rating.

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Excellent risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. 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.

Compared with other funds in the Short-Term Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity 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. Compared with the average strategy in the category, the managers have been overweight B rated bonds in recent years. In the latest month, the strategy has relatively overweighted B rated bonds compared with its peers as well. Additionally, there's been a bias away from debt with longer than 30-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with longer than 30-year maturities than peers. Finally, during the past few years, the fund leaned away from government bonds. In recent months, the strategy also had less exposure to government bonds compared to its peers.

This strategy's 12-month yield is 4.2%, higher than its average peer's 3.7%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 4.8%. Typically, higher yields come at the cost of higher credit risk. The portfolio has a lower average surveyed credit quality of BBB, compared with the category average's A and 8% of the fund's assets are rated non-investment-grade, compared to its peers' 2%. Strategies that take on more credit risk tend to be at their best when markets are as well. This risk contributes to strong performance during bull markets at the cost of losing more on the downside.

Cary J. Fitzgerald’s veteran status, with over 25 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 3.4 stars, demonstrating encouraging risk-adjusted performance. Despite having a small team, the two listed managers boast over 30 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. 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.

In the last two years, this share class has returned 1.0%, even with the return of the category benchmark, the Bloomberg Barclays U.S. Aggregate Government/ Credit 1-3 Year Index, for the same period. It was also even with peers as the category’s average return for the period was 1.0%. The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing one-year period.

This share class lands 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 is well-positioned to generate positive alpha compared with its category benchmark, explaining its Morningstar Medalist Rating of Silver.