JPMorgan USD Emerging Mkts Svr Bd ETF JPMB

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

The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in AAA rated bonds and an overweight in government bonds compared with category peers. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan USD Emerging Mkts Svr Bd ETF earns a High Process Pillar rating.

The most notable contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Excellent risk-adjusted performance also supports the process, as shown by 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.

Compared with other funds in the Emerging Markets 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. Relative to the average strategy in the category, the managers have been substantially underweight AAA rated bonds in recent years. In the latest month, the strategy has also relatively underweighted AAA rated bonds compared with Morningstar Category peers. Additionally, the managers have exhibited a notable sector bias towards government bonds over the past few years. Compared with category peers, the strategy had more exposure to government bonds in the most recent month. Finally, during the past few years, the fund leaned towards debt with three- to five-year maturities. In this month, the strategy also leaned more towards debt with three- to five-year maturities compared with its peers.

This strategy's 12-month yield is 5.9%, lower than its average peers' 6.2%. Plus, its 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return) sits at 5.8%. While a lower yield may deliver less income, it also tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower 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 BB.

There are three managers listed on the fund: Supreet Khandate, Kush Purohit, Andrew Bartlett. Though they do not manage other products together, managers may manage them individually. The team has undergone a bout of turnover recently, with Niels Schuehle leaving within the last three months. Even though it is a passive fund, high turnover can still hinder the effectiveness of the investment process.

Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

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.

Since the new regime's current strategy does not necessarily represent the past, it is difficult to compare them. The new team took the reins in May 2024 and looking at their performance so far, they have posted notable results. Since the manager change three months ago, the fund earned a 5.1% return, outpacing its category peers' average 4.3% and topping the category index’s 4.6% return. With this narrow of a time frame with the new team, it is difficult to meaningfully assess the fund’s risk.

This share class is within the cheapest quintile of its Morningstar Category. Its low expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class has the ability to deliver positive alpha compared with its category benchmark, explaining its Morningstar Medalist Rating of Gold.