JPMorgan Municipal ETF JMUB

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

The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. 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 a considerable underweight position in debt with 20- to 30-year maturities and has an overweight in AA rated bonds compared with category peers. The strategy is part of a first-rate parent that has a high lineup success ratio and overall reasonable fees. These attributes support its Above Average Parent Pillar rating.

JPMorgan Municipal ETF earns an Above Average Process Pillar rating.

The most important driver of 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. The size of the portfolio management team also reinforces the process. With four portfolio managers, the fund is reasonably well-resourced. 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 Muni National Interm 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 significantly underweight debt with 20- to 30-year maturities. Additionally, there's been a notable overweight bias toward AA rated bonds. And finally, the fund leans meaningfully toward cash.

This strategy has a 2.8% 12-month yield, higher than its average peer's 2.6%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 3.5%. While a higher yield may deliver more income, it also tends to indicate higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

Kevin M. Ellis, the longest-tenured manager on the strategy, boasts over 25 years of portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.7 stars, demonstrating dissapointing risk-adjusted performance compared with category peers. The team boasts an experienced corps of listed portfolio managers, with three others supporting Kevin M. Ellis. Together, they average 23 years of 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.

Over the past two years, it trailed the category index, the Bloomberg Barclays Municipal 1-15 Year Bond Index, by an annualized 37 basis points, but outperformed its average peer by 71 basis points. But more importantly, when widening the time horizon, the strategy came out ahead. On a four-year basis, it outperformed the index by an annualized 15 basis points.

A risk-adjusted perspective shows the fund in a more favorable light. The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing three-year period. Notably, these strong risk-adjusted results have not come with more volatility for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation.

This share class sits in the cheapest quintile of its Morningstar Category. Its attractive expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class is well-positioned to generate positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Silver.