BNY Mellon Ultra Short Income ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy benefits from its experienced portfolio management team. This is a positive driver for the strategy's Average People Pillar rating. The strategy earns an Average Process Pillar rating.  The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. BNY Mellon Ultra Short Income ETF earns an Average Process Pillar rating.    The main driver of the rating is the parent firm's five-year risk-adjusted success ratio of 58%. 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. The parent firm's impressive risk-adjusted performance, as shown by its average overall Morningstar Rating of 3.3 stars, also contributes to the process. Lastly, the process is limited by the parent firm's five-year retention rate of 60%, which suggests it could do more to hold onto its portfolio managers.

 Compared with other funds in the Ultrashort Bond Morningstar Category, this fund takes on lower credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer 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 category average, the managers have been an overweight corporate debt in recent years. In the latest month, the strategy has relatively overweighted corporate bonds compared with its peers as well. Additionally, there's been an underallocation from BBB rated bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to BBB rated bonds than peers. Finally, during the past few years, the fund leaned towards debt with one- to three-year maturities. In this month, the strategy also leaned more towards debt with one- to three-year maturities compared with its peers.

 This strategy has a modest 4.4% 12-month yield, lower than its average peers' 4.7%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 5.3%. Typically, a lower yield comes with the benefit of less credit risk. The portfolio has a higher average surveyed credit quality of AA, compared with the typical peers' A, and it holds no non-investment-grade assets, despite the average peers' 1%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

Average

Process

BNY Mellon Ultra Short Income ETF earns an Average People Pillar rating. The largest contributor to the rating is its parent firm's five-year success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. A low cost, with fees that rank in its category's cheapest quintile, also contributes to the rating. Fees detract from net returns, so the managers have a lower expense hurdle to overcome. Lastly, the rating is limited by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns.


Stephen Murphy’s veteran status, with 21 years of listed portfolio management experience, brings a wealth of experience to the table.  Despite having a small team, the two listed managers boast 16 years of listed portfolio management experience. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

People

BNY Mellon Investment Management, the asset-management arm of financial conglomerate Bank of New York Mellon, has been busy with changes since CEO Hanneke Smits ascended to her seat in October 2020. The firm’s seven wholly owned but autonomous investment affiliates mostly focus on distinct asset classes. Smits streamlined this arrangement in February 2021 by consolidating most of BNYIM’s active fixed-income and equity capabilities into two affiliates, Insight and Newton, respectively, and by trimming overlapping investment teams; further, the firm sold private-credit-focused Alcentra to Franklin Templeton in May 2022 partially because of that boutique’s operational complexity. Smits believes these organizational changes should help BNYIM’s affiliates manage their strategies more effectively. Yet the firm’s broad strategy lineup remains bloated owing in part to the affiliates’ openness to customized client requests regardless of asset size. 

Smits has sought to improve collaboration across the firm’s investment teams, including by pushing affiliate CEOs to replace “star managers” with comanagers on most strategies. This is a noteworthy effort, but it led to the departure of some managers who didn’t want to partake in the new model. Amid the uncertainty of how these and other changes ultimately shake out, the firm retains its Average Parent rating.

Parent

BNY Mellon Ultra Short Income ETF

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