JPMorgan High Yield Municipal ETF JMHI

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

The strategy's sensible investment philosophy merits 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 High Yield Municipal ETF earns an Above Average Process Pillar rating.

The most important driver of the rating is its parent firm's impressive 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 bolsters the rating. The measure indicates the percentage of a firm's funds that survived and beat 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 the experience of the management team, which averages six years at this fund.

Compared with other funds in the High Yield Muni Morningstar Category, this fund consistently holds a significantly larger cash position over the past few years. But in terms of long-term interest-rate sensitivity, it does not have a portfolio bias and hews closely to peers.

This strategy's 12-month yield is 4.9%, higher than its average peer's 4.0%. It also has a 4.1% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Higher yields tend 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 BB.

Although this strategy was incepted on September 2007, 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.

Since the new regime's current strategy is not necessarily representative of the past, it is difficult to compare them. The new team took the reins in February 2024 and looking at their performance so far, they have posted middling results. Since the manager change six months ago, the strategy earned a 3.5% return through month-end, trailing its typical peers' 4.1% but surpassing the Bloomberg Barclays 65% High Grade/ 35% High Yield Bond Index’s 3.2% 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 competitive expense ratio, taken together with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha relative to its category benchmark, leading to its Morningstar Medalist Rating of Bronze.