Putnam ESG Core Bond ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy gets an Average Process Pillar rating, the result of a recent pillar downgrade from Above Average.  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 style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. Putnam ESG Core Bond ETF earns an Average Process Pillar rating.    The main driver of the rating is the size of its portfolio management team. With four portfolio managers at the helm, the fund is reasonably well-resourced. The stability of talent across its parent firm also strengthens the process. The firm's asset-weighted manager tenure of 18 years demonstrates its ability to retain portfolio managers. Lastly, the process is limited by its parent firm's subpar risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.5 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 Compared with other funds in the Intermediate Core Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity 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. Relative to the average strategy in the category, the managers have been an overweight corporate bonds in recent years. In the latest month, the strategy has relatively overweighted corporate bonds compared with its peers as well. Additionally, there's been a notable underallocation from A rated bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to A rated bonds than peers. Finally, during the past few years, the fund leaned meaningfully towards debt with one- to three-year maturities. In this month, the strategy also leaned more towards debt with one- to three-year maturities compared with its peers.

 This strategy has a 4.4% 12-month yield, higher than its average peer's 3.6%. 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.

Average

Process

Putnam ESG Core Bond ETF earns an Average People Pillar rating. Michael V. Salm, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, indicating that their risk-adjusted returns exceeded the category average. Michael V. Salm is supported by an experienced team, being able to draw on three additional listed managers, who average 15 years of listed portfolio management experience. As a team, they manage two investment vehicles together, with an asset-weighted average Morningstar Medalist Rating of Neutral. This means, in aggregate, the team falls short and will struggle to produce positive alpha. 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.

People

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Parent

Putnam ESG Core Bond ETF

PCRB broadly invests in investment grade US fixed income securities that meet certain environmental, social and governance criteria on a sector-specific basis. The actively managed targets bonds with maturities of three years or more.

Avantis International Small Cap Value ETF

Avantis Emerging Markets Equity ETF

Avantis US Equity ETF

Avantis U.S. Small Cap Value ETF

Vanguard Total Bond Market ETF

Capital Group Dividend Value ETF

Capital Group Growth ETF

Dimensional US Core Equity 2 ETF

Dimensional International Core Equity Market ETF

Dimensional Core Fixed Income ETF

Dimensional Emerging Markets Core Equity 2 ETF

Dimensional Emerging Markets Value ETF

Dimensional International Core Equity 2 ETF

Dimensional International Value ETF

Dimensional US Equity ETF

Dimensional US High Profitability ETF

iShares MSCI Emerging Markets ETF

Fidelity Total Bond ETF

First Trust TCW Opportunistic Fixed Income ETF

Janus Henderson AAA CLO ETF

JPMorgan Equity Premium Income ETF

JPMorgan Nasdaq Equity Premium Income ETF

Janus Henderson Mortgage-Backed Securities ETF

PGIM Ultra Short Bond ETF

And, plenty of ink has been spilled about how much money has gone into active ETFs in 2023, and from a pure top-line flows perspective, it's true. A significant chunk of the $289 billion that has entered U.S.-listed ETFs year to date went into active products — 22%, in fact.

2023's Overactive Active ETF Flows Are Mostly a Mirage

BNY Mellon Global Emerging Markets ETF

BNY Mellon Sustainable International Equity ETF

BNY Mellon Sustainable US Equity ETF

American Century Sustainable ETF

iShares MSCI USA ESG Optimized ETF

Vanguard ESG US Stock ETF

Franklin Liberty U.S. Core Bond ETF

Franklin Investment Grade Corporate ETF

JPMorgan Ultra-Short Income ETF

Putnam Sustainable Leaders ETF

iShares MSCI USA Quality Factor ETF

Calamos Antetokounmpo Global Sustainable Equities Etf

Jpmorgan Climate Change Solutions ETF

Engine No. 1 Transform 500 ETF

This week, the VettaFi Voices addressed the topic of whether investors should use active or passive management for their ESG investing.

VettaFi Voices: Active or Passive Management for ESG ETFs?

First Trust Limited Duration Investment Grade Corporate ETF

This trend is poised to continue this year.

Actively Managed ETFs Claim Outsized Portion of 2023 Inflows

Putnam Sustainable Future ETF

Putnam ESG High Yield ETF

Putnam PanAgora ESG Emerging Markets Equity ETF

Putnam PanAgora ESG International Equity ETF

Putnam ESG Ultra Short ETF

BOSTON--(BUSINESS WIRE)--Putnam Investments today announced the availability of Putnam Sustainable Retirement Funds, a target-date series for the retirement savings marketplace. The suite invests in actively managed sustainable and environmental, social and governance (ESG)-focused exchange-traded funds (ETFs) managed by Putnam.

Putnam Investments Announces Sustainable Retirement Target-Date Funds

Putnam Investments has launched five new transparent, actively managed exchange traded funds that begin trading today on the New York Stock Exchange. The new ETFs nearly double the firm's suite of actively managed ETF offerings.

Putnam Launches 5 New Active ETFs

Putnam BDC Income ETF

Putnam Focused Large Cap Growth ETF

Putnam Focused Large Cap Value ETF

Putnam BioRevolution ETF

BOSTON--( BUSINESS WIRE )--Putnam Investments today announced that it has officially launched five new transparent, actively managed exchange-traded funds (ETFs) that begin trading today on the New York Stock Exchange.

Putnam Investments Launches Fixed Income and Non-U.S. Equity Exchange-Traded Funds

News for Putnam ESG Core Bond ETF ETF (PCRB)