A sound investment process and strong management team underpin JPMorgan Municipal ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in debt with 20- to 30-year maturities and an overweight in AA rated bonds compared with category peers. The management team's large personal investment in the strategy helps it earn 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.

Analyst Rating

Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. JPMorgan Municipal ETF earns an Above Average Process Pillar rating.    The most substantial contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 57%. 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. Excellent risk-adjusted performance also bolsters the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 Compared with other funds in the Muni National Interm Morningstar Category, this fund has been consistently sensitive to interest-rate changes 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 underweight debt with 20- to 30-year maturities in recent years. In the latest month, the strategy has also relatively underweighted debt with 20- to 30-year maturities compared with Morningstar Category peers. Additionally, there's been a notable overweight bias towards AA rated bonds over the past few years. Compared with category peers, the strategy had more exposure to AA rated bonds in the most recent month. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

 This strategy has a 3.2% 12-month yield, higher than its average peer's 2.8%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 3.4%. Typically, higher yields come at the cost of 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 A.

Above Average

Process

JPMorgan Municipal ETF earns an Above Average People Pillar rating. The most significant 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 outperformed their respective category's median return for the period. The portfolio managers' outperformance at the funds they run, as measured by their combined three-year manager excess returns, also influences the rating. Lastly, the rating is limited by the turnover of its management team. The fund last saw a manager change zero month ago, which suggests that it could do more to retain its portfolio managers.


The team is backed by Michelle V. Hallam, the longest-tenured manager on the strategy, who provides 20 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, demonstrating underwhelming risk-adjusted performance. Michelle V. Hallam has an experienced backdrop of support. The three listed managers boast 14 years of average listed portfolio management experience. The highest personal investment in the fund by any of its managers is between $100,000 and $500,000. That's on the low side--it would need to be more than $1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors.

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 Municipal ETF

JMUB holds an actively managed portfolio of various US municipal securities.

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