JPMorgan Sustainable Municipal Inc ETF JMSI

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

The strategy's investment process inspires confidence and 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 A rated bonds and an overweight in cash compared with category peers. The strategy's entire management team changed less than a year ago. The strategy's new leadership earns 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 Sustainable Municipal Inc ETF earns an Above Average Process Pillar rating.

The leading factor in the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 53% also contributes to the process. 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. Their impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. However, the process is limited by being an actively managed strategy. Historical data, such as 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 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 underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, the fund has exhibited a notable sector bias towards cash over the past few years. Compared with category peers, the strategy had more exposure to cash in the most recent month. Finally, during the past few years, the fund leaned towards debt with 15- to 20-year maturities. In this month, the strategy also leaned more towards debt with 15- to 20-year maturities compared with its peers.

This strategy's 12-month yield is 3.7%, higher than its average peer's 3.0%. It also has a 3.5% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Typically, higher yields come at the cost of 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.

Although this strategy was incepted on February 1993, its listed management team joined within the past three years. Therefore, the fund’s historical data is not applicable to the current team.

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.

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

The fund’s long-term track record is largely no longer applicable, as it does not necessarily represent the current strategy. The new team took the reins in February 2024 and looking at their performance so far, they have posted notable results. Since the manager change six months ago, the strategy garnered a 2.4% return through month-end, over its peers' average 1.9% and the Bloomberg Barclays Municipal 1-15 Year Bond Index’s 1.4% return. With this narrow of a time frame with the new team, it is difficult to make a meaningful assessment of the fund’s risk.

Thus, assessing cost is a critical step in any investment evaluation. This share class sits in the cheapest quintile of its Morningstar Category. Its low fee, taken together with the fund’s People, Process, and Parent Pillars, suggests that this share class can deliver positive alpha versus its category benchmark, explaining its Morningstar Medalist Rating of Silver.