JPMorgan Income ETF’s JPIE experienced manager trio, established approach, and focus on consistent income make it a compelling multisector bond offering. This actively managed exchange-traded fund was launched in November 2021 and, as such, its sibling JPMorgan Income Fund JMSIX reflects the strategy’s longer-term history.

The strategy features a very capable lead manager. Andrew Norelli has anchored the mutual fund since its mid-2014 inception and continues to evolve with the additions of Drew Headley and Thomas Hauser, securitized and high-yield specialists, respectively. The fund draws on JPMorgan’s Global Fixed Income, Currency, & Commodities platform, which includes a small army of sector specialists, research analysts, traders, and risk managers. These common resources across the firm’s fixed-income strategies highlight the depth, experience, and collaboration required to effectively manage this wide-ranging mandate. The comanagers’ broad fixed-income knowledge is key to understanding relative value, but their specialty expertise gives this team an edge.

That relative value approach underscores a solid process. Like other firm managers, this team draws on the broader group for its macro outlook to guide broad positioning. Their daily interactions inform sector and security selection and focus on investments that will deliver high, consistent income. Yet its benchmark-agnostic mandate allows them wide discretion to implement the managers’ best ideas. Despite this flexibility, the fund aims to keep volatility between 4% and 6%, as measured by standard deviation.

The flexibility focuses on high-yield corporates and securitized debt that constitute the majority of the fund’s assets. Better relative valuations and risk-adjusted return prospects have led to higher securitized bond stakes in recent years, which made up nearly 70% of assets (as of September 2023), up from about 65% a year ago. However, the team effectively diversifies these holdings that include agency mortgage-backed securities, nonagency MBS, commercial MBS, and asset-backed securities. A cautious economic outlook since 2022 has resulted in reduced credit risk. For example, the fund’s agency MBS stakes doubled to 20.2% of assets (as of September 2023) from a year ago, while its 22% high-yield corporate allocation fell by about 6 percentage points.

The fund has delivered solid long-term absolute and risk-adjusted results. Since its July 2014 inception, the R6 shares’ 3.0% annualized return through November 2023 beat its average multisector bond peer’s 2.4% and was better than 78% of rivals. The fund’s normal yield advantage versus peers helped drive performance, but the strategy’s elastic positioning can lead to varied outcomes over shorter periods when riskier assets are out of favor. More recently, short-term performance between the mutual fund and ETF has diverged due to the timing of cash flows into the ETF and differences in the vehicles’ CMBS stakes, which can’t be easily matched in the ETF. Over the longer term, performance should be more closely aligned.

Analyst Rating

This compelling multisector bond ETF delivers consistent income.

Senior Analyst

Paul Olmsted

Invesco Senior Loan ETF

The fund’s comanagers follow JPMorgan’s time-tested, value-driven approach to generate consistent income; it earns a Process rating of Above Average.

The strategy’s flexible, benchmark-agnostic mandate gives the team wide discretion to implement the team’s best ideas from global macroeconomic and sector specialists across the firm. The challenge here is to synthesize the various inputs to construct a diversified portfolio within a volatility range of 4%-6%, as measured by standard deviation. The strategy’s parameters are broad, with a duration band of less than 10 years (typically between 2 and 6 years), a maximum of 65% in below-investment-grade debt, and a 10% maximum in non-U.S.-dollar-denominated securities.

JPMorgan’s quarterly macro view guides broad portfolio positioning, and the daily collaboration among the comanagers, sector specialists, researchers, and traders informs most decisions. Norelli and team strive to achieve diversification within these higher-income areas, led by high-yield corporates and securitized debt, which make up a majority of the fund’s assets. This securitized stake has more than doubled to nearly 70% since the fund’s early days, but thoughtful diversification within this area includes agency MBS, nonagency MBS, CMBS, and ABS.

The fund’s income-banking mechanism estimates distributions throughout a calendar year and smooths those to deliver predictable monthly income to investors; it will pay any excess income at year-end.

Above Average

Process

Veteran managers Andrew Norelli, Drew Headley, and Tom Hauser harness the firm’s ample and capable supporting teams to earn a People rating of Above Average.

Norelli has anchored this strategy since the fund’s mid-2014 inception and brings more than two decades of multisector bond expertise. Comanagers Headley and Hauser joined in 2017 and 2020, respectively, and each brings about 30 years of industry experience into the fold. Collaboration and knowledge across all fixed-income sectors are key here, but their respective specialty expertise gives this team an edge. Headley is head of securitized strategies at the firm and manages the securitized sleeve of the portfolio, while Hauser is a high-yield specialist and manages the non-investment-grade corporate sleeve. However, Norelli’s broader market expertise and since-inception tenure introduces moderate key-manager risk here.

The comanagers work closely to make investment decisions. This team approach requires each manager to be well-versed in multiple areas of the bond market and draws on the firm’s sizable and capable supporting resources, which include 21 investment-grade, 23 high-yield, and seven securitized credit analysts. The firm promoted the former head of global credit research, Kay Herr, to U.S. fixed-income CIO effective October 2023, and appointed two-decade research veteran Samrawit Soquar to replace her in that role.

Alignment of interests with investors is strong, too. Norelli and Headley each invest more than $1 million in the strategy, while Hauser has between $100,001 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 Income ETF

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