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 cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating.  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 understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Federated Hermes Short Duration HY ETF earns an Above Average Process Pillar rating.    The leading factor in the rating is the firm's five-year retention rate of 84% over the period. Management team experience, which averages 23 years at this fund, also supports the process. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 48%. 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. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 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 over the past few years. 

 This strategy has a 6.7% 12-month yield, higher than its average peer's 6.4%. In addition, it has a 7.0% 30-day SEC yield (a measure similar to yield-to-maturity). 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 B.

Above Average

Process

Federated Hermes Short Duration HY ETF earns an Average People Pillar rating. Mark E. Durbiano, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 3.1 stars, demonstrating average risk-adjusted performance compared with category peers. Mark E. Durbiano has an experienced listed co-manager. Together, they average 23 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.

 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.

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