JPMorgan Core Plus Bond ETF JCPB benefits from the same experienced managers and vast resources that support the collaborative, time-tested process as its open-end sibling JPMorgan Core Plus Bond JCPUX. The retirement announcement of veteran manager and the group's fixed-income CIO Steve Lear is significant, but J.P. Morgan's depth of talent tempers any concerns.
Lear ceded CIO duties on Oct. 1, 2023, to the former head of fixed-income research Kay Herr, who was also named a comanager of this strategy in June 2023. Herr's extensive research background is impressive, but her management experience is limited. With that, Lear will remain with the strategy until March 2024 while Herr transitions to the comanager role. Along with Andrew Norelli, a two-decade veteran and comanager since 2014, this team will continue to drive portfolio decisions. Three additional tenured managers run their respective sleeves of this portfolio. Rick Figuly manages the securitized bucket, while Lisa Coleman and Tom Hauser oversee investment-grade and high-yield credit, respectively. The firm's large global fixed-income platform and its network of specialists help guide macro positioning and contribute to bottom-up ideas.
It's hard to poke holes in this time-tested, robust investment process that combines top-down views with diligent security selection and measured risk-taking. Collaboration is key to the strategy’s success. J.P. Morgan's quarterly investment meeting sets macro themes, while weekly sector meetings focus on relative value and tactical positioning. The lead managers synthesize these inputs to inform overall risk, duration and curve positioning, as well as sector allocation, and work closely with its sector-focused comanagers, who are responsible for bottom-up security selection.
The strategy balances its core bond characteristics with riskier, off-benchmark stakes. Various types of securitized debt feature prominently, typically 35% to 50% of assets. These aren't plain-vanilla pass-throughs; the team favors mortgage pools that meet its stringent standards and protect against prepayment risk and limit duration extension. High-yield credit is the largest non-investment-grade allocation, and the team adjusts these stakes to its outlook for risk. A cautious macro view has led the team to reduce high yield to about 10% of assets at the end of June 2023, about 3 percentage points less than two years ago, while its Treasuries have more than doubled to 38% over the same period.
While the exchange-traded fund's top-quartile annualized result since its February 2019 inception through August 2023 is strong, its mutual fund sibling's performance is a better historical measure. Since Norelli's March 2014 start, the 1.8% annualized return of JPMorgan Core Plus Bond's R6 shares through August 2023 beat the Bloomberg U.S. Aggregate Bond Index's 1.3% and the distinct intermediate core-plus bond Morningstar Category peer median's 1.6%. The team's cautious 2023 economic outlook has led to less credit risk and longer duration, which caused it to lag peers for the year to date through August.