Strength in Federated Hermes Short Duration HY ETF's Process Pillar is partially offset by an Average People Pillar rating, leading to 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’s management team earns an Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable overweight position in debt with one- to three-year maturities and BB rated bonds compared with category peers. The strategy's parent organization earns the firm an 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.

Analyst Rating

Morningstar's evaluation of this fund's process seeks to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Federated Hermes Short Duration HY ETF earns an Above Average Process Pillar rating.   The main driver of the rating is the firm's five-year retention rate of 84% over the period. Management team experience, which averages 24 years at this fund, also supports the rating. Lastly, the process is limited by its parent firm's disappointing risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.9 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 Compared with other funds in the High Yield Bond Morningstar Category, this fund's cash position and interest-rate sensitivity are historically in line with peers. 

 This strategy's 12-month yield is 6.7%, higher than its average peer's 6.1%. It also has a 7.8% 30-day SEC yield (a measure similar to yield-to-maturity). 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 has a higher average surveyed credit quality of BB, compared with the typical peers' B. Strategies that take on less credit risk can often weather more-adverse market conditions.

Above Average

Process

Federated Hermes Short Duration HY ETF earns an Average People Pillar rating. Mark E. Durbiano’s veteran status, with over 25 years of portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.9 stars, demonstrating average risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 24 years of portfolio management experience.  None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

As Federated Hermes continues to build, it maintains an Average Parent rating. 
This firm has been in building mode. In addition to purchasing London-based Hermes Investment Management (initially 60% in 2018, the rest later in early 2021), Federated Investors picked up parts of PNC’s investment-management business in 2019 and Hancock Horizon’s small set of nine mutual funds in 2021. While the latter two acquisitions were scale plays, the Hermes purchase came with an intention to transform into an ESG-investing leader in what the firm called a reverse merger.
To signal its commitment, the publicly traded but family controlled firm changed its name to Federated Hermes. Although some of Hermes’ capabilities, including its expansive active ownership effort, are compelling, integration has been slow, and it is not yet clear how well these efforts are being coordinated on either investment or product development grounds.
Meanwhile, Federated Hermes’ continues as one of the fund industry’s larger and better money market managers, with USD 420 billion in money market assets, comprising two thirds of the firm’s assets under management as of April 2022. The centralized fixed-income group (15% of AUM) is also a bright spot overall, but the disparate equity franchises (15%) have struggled with some investment personnel turnover and volatile performance. Alternatives (4%) remain limited at the firm.

Parent

Federated Hermes Short Duration High Yield ETF

FHYS seeks high current income through the active management of short-term US dollar-denominated corporate debt securities that are rated below investment-grade.

Federated Hermes US Strategic Dividend ETF

Federated Hermes Short Duration Corporate ETF

Brandon Clark, senior vice president, director of ETF business at Federated Hermes, talks about the promise of active ETFs, and why mutual fund companies are entering the ETF industry.

News for Federated Hermes Short Duration High Yield ETF ETF (FHYS)