JPMorgan Core Plus Bond ETF JCPB benefits from the same experienced managers and vast resources that support the collaborative, time-tested process as its open-end sibling JPMorgan Core Plus Bond JCPUX. The retirement announcement of veteran manager and the group's fixed-income CIO Steve Lear is significant, but J.P. Morgan's depth of talent tempers any concerns. 

Lear ceded CIO duties on Oct. 1, 2023, to the former head of fixed-income research Kay Herr, who was also named a comanager of this strategy in June 2023. Herr's extensive research background is impressive, but her management experience is limited. With that, Lear will remain with the strategy until March 2024 while Herr transitions to the comanager role. Along with Andrew Norelli, a two-decade veteran and comanager since 2014, this team will continue to drive portfolio decisions. Three additional tenured managers run their respective sleeves of this portfolio. Rick Figuly manages the securitized bucket, while Lisa Coleman and Tom Hauser oversee investment-grade and high-yield credit, respectively. The firm's large global fixed-income platform and its network of specialists help guide macro positioning and contribute to bottom-up ideas.

It's hard to poke holes in this time-tested, robust investment process that combines top-down views with diligent security selection and measured risk-taking. Collaboration is key to the strategy’s success. J.P. Morgan's quarterly investment meeting sets macro themes, while weekly sector meetings focus on relative value and tactical positioning. The lead managers synthesize these inputs to inform overall risk, duration and curve positioning, as well as sector allocation, and work closely with its sector-focused comanagers, who are responsible for bottom-up security selection. 

The strategy balances its core bond characteristics with riskier, off-benchmark stakes. Various types of securitized debt feature prominently, typically 35% to 50% of assets. These aren't plain-vanilla pass-throughs; the team favors mortgage pools that meet its stringent standards and protect against prepayment risk and limit duration extension. High-yield credit is the largest non-investment-grade allocation, and the team adjusts these stakes to its outlook for risk. A cautious macro view has led the team to reduce high yield to about 10% of assets at the end of June 2023, about 3 percentage points less than two years ago, while its Treasuries have more than doubled to 38% over the same period. 

While the exchange-traded fund's top-quartile annualized result since its February 2019 inception through August 2023 is strong, its mutual fund sibling's performance is a better historical measure. Since Norelli's March 2014 start, the 1.8% annualized return of JPMorgan Core Plus Bond's R6 shares through August 2023 beat the Bloomberg U.S. Aggregate Bond Index's 1.3% and the distinct intermediate core-plus bond Morningstar Category peer median's 1.6%. The team's cautious 2023 economic outlook has led to less credit risk and longer duration, which caused it to lag peers for the year to date through August.

Analyst Rating

A dependable core-plus bond active ETF.

Senior Analyst

Paul Olmsted

Invesco Senior Loan ETF

A time-tested, collaborative approach. The lead managers take macro cues to inform broad portfolio themes, while the sleeve managers drive bottom-up security selection to earn an Above Average Process rating.

J.P. Morgan's quarterly investment meeting sets macro themes for the subsequent three to six months while weekly sector meetings focus on relative value and tactical portfolio positioning. Lear, Norelli, and Herr synthesize these inputs to inform the portfolio’s overall risk, duration and curve positioning, and sector allocation. The leads work closely with its sector-focused comanagers across investment-grade credit, high yield, and securitized debt, who are responsible for bottom-up security selection. While these sleeve managers are measured against their respective internal benchmarks, they're allowed a degree of flexibility to go off script to reflect prevailing views and take advantage of attractive opportunities; for example, good relative valuations in BBB rated corporate bonds led the managers to increase this stake to 15% of portfolio assets in 2021 from 8% in 2020 despite the investment-grade corporate sleeve's higher-quality internal benchmark, the Bloomberg U.S. Corporate A3 or Better Index.

This strategy has packed more punch than its Bloomberg U.S. Aggregate Bond Index, holding up to 30% in non-investment-grade bonds. Junk-rated corporates, typically between 5% and 25% of assets, commercial mortgage-backed securities (up to 15%), and nonagency mortgage-backed securities and asset-backed securities (each up to 10%) make up most of this allocation. Duration stays in a tight band, typically within plus/minus 10% of the index.

Above Average

Process

The team touts an enviable combination of experience and depth. Seasoned managers and robust supporting resources anchor this strategy, but the retirement of longtime manager and fixed-income CIO Steve Lear keeps its People rating at Above Average.

In June 2023, J.P. Morgan announced Lear's retirement effective March 2024 and Kay Herr's promotion to fixed-income CIO effective October 2023; she was also named comanager on the fund effective immediately. The firm has given ample notice for a smooth leadership transition, but Lear's experience will be missed. Herr's research background is extensive, but her management experience is limited. Lear will remain on the fund for the time being, while the other co-lead Andrew Norelli will work closely with the team to guide asset-allocation decisions. Norelli, who brings over two decades of investment experience, joined the strategy in 2014. Three additional veteran comanagers each represent the fund's sleeves. Rick Figuly manages the securitized sleeve (roughly 40% of assets) and has been on the fund since 2006, while Lisa Coleman and Tom Hauser oversee the investment-grade (20%) and high-yield credit sleeves (10%), respectively, and joined in July 2020.  

This group doesn't want for resources. Alongside the comanagers, the firm's large global fixed-income, currency, and commodities platform and its network of fixed-income specialists help guide macro positioning and contribute to bottom-up ideas. 

The managers' personal ownership in the strategy aligns their interests with investors'. Lear invests at least $1 million, while Norelli has between $500,000 and $1 million and Herr between $100,000 and $500,000.

People

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.
As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various global cohorts and diverse asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans. 
The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

Parent

JPMorgan Core Plus Bond ETF

JCPB is an actively-managed ETF consisting of a broad array of fixed income securities.

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News for JPMorgan Core Plus Bond ETF ETF (JCPB)