JPMorgan Short Duration Core Plus ETF JSCP

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

The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy's sensible investment philosophy 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 AA rated bonds and debt with over 30-year maturities compared with category peers. The strategy belongs to a strong firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a competitive lineup success ratio and overall reasonable fees.

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 59%. 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. Noteworthy risk-adjusted performance also influences the rating. 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. Opening the analysis to additional factors, the portfolio has displayed three 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 AA rated bonds. Additionally, there's been a bias away from debt with longer than 30-year maturities. And finally, the fund leans away from government bonds.

This strategy's 12-month yield is 3.5%, higher than its average peer's 3.1%. In addition, it has a 4.8% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, higher yields come at the cost of higher credit risk. The portfolio has a lower average credit rating of BBB, compared with the category average's A and its non-investment-grade stake is 10% of assets, compared to its peers' 3%. Strategies with more credit risk may have a higher return, but they are riskier.

The team is backed by Cary J. Fitzgerald, the longest-tenured manager on the strategy, who provides over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.5 stars, demonstrating encouraging risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of over 25 years of portfolio management experience. As a team, they manage two investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. With at least one manager investing$ 1 million or more in this offering, investors can have some assurance that the team's interests are aligned with theirs.

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.

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.

However, with such a short time frame, it is difficult to draw a conclusion on its prospects until it has completed a full market cycle. Over the past two years, this share class has lost 2.0%, compared with the-1.4% return of the category benchmark, the Bloomberg Barclays U.S. Aggregate Government/ Credit 1-3 Year Index, for the same period. It also lagged peers as the category’s average loss for the period was 1.8%. The share class led the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing one-year period.

This share class is within the cheapest quintile of its Morningstar Category. Its competitive fee, paired with the fund’s People, Process, and Parent Pillars, indicates that this share class has high potential to deliver positive alpha relative to its category benchmark, explaining its Morningstar Medalist Rating of Silver.