PGIM Floating Rate Income ETF boasts strong People and Process Pillar ratings, but other weaknesses hold this strategy's Morningstar Medalist Rating at Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy merits an Above Average Process Pillar rating.  The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People, Process 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

This offering shares an approach with its successful high-yield-focused sibling. Rigorous bottom-up research that makes use of PGIM's extensive resources underpins this strategy's process. Analysts produce quarterly sector-level assessments that evaluate each sector's current profile and trends. They view each issuer through that lens and combine this internal view with valuations to identify the most attractively priced debt. Portfolio managers combine that output with their respective sector expertise to select individual holdings. 
When the team believes it can get better returns for the same unit of risk, it will hold high-yield, investment-grade debt, and CLOs, along with hedges to avoid too much deviation from the bank-loan market. The group also has a well-defined, risk-controlled system for sizing issuer exposures based ‎on financial health and relative value. The ‎outcome is measured against tracking-error risk budgets viewed through ‎multiple lenses including sector, and market-stress exposures. The strategy does take notable risks, which have occasionally led to stumbles, but none that have been insurmountable. 
We have had concerns about the portfolio’s high exposure to holdings labeled level 3 based on an accounting standard for investments priced with few "observable inputs." At one point in 2019, the fund’s SEC filings designated 23.6% of its assets as level 3, lending concern it could signal potential liquidity challenges.
PGIM has since begun employing more third-party pricing data for accounting purposes than it used to, though, and now reports much lower level 3 allocations. Combined with the strategy's proven process, the additional mix of bonds and CLOs, as well as an overall tilt toward larger issues, give us confidence in its resilience. Those factors underpin our change to an Above Average Process rating.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point) Morningstar maps the covered vehicle’s Process Pillar to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning Process Pillar ratings to vehicles that follow the same strategy.

Above Average

Process

The team's depth and experience earn this strategy an Above Average People rating. Manager Brian Juliano is a bank-loan market veteran and has comanaged this offering since its March 2011 inception. Juliano heads PGIM’s U.S. leveraged-loan team, serves as co-head of the firm’s U.S. CLO business, and manages its CLO tranche investments. He joined PGIM in 2000 and its bank-loan team in 2003.
Four portfolio managers surround Julian. Robert Cignarella has comanaged alongside Juliano since March 2014 and Parag Pandya since April 2018, while Ian Johnston and Robert Meyer joined the strategy's ranks in April 2021. Cignarella, who joined the firm in 2014, doubles as PGIM's co-head of U.S. high yield and watches over the portfolio's high-yield bond sleeve. Pandya joined PGIM in 1992 and was a high-yield credit analyst for 17 years before ascending to the role of bank-loan portfolio manager in October 2015. Johnston previously acted as a bank-loan research analyst, and Meyer was a member of the firm's quantitative research program; the two joined PGIM in 2010 and 2012, respectively.
They all benefit from the research of more than 50 leveraged finance-focused analysts in the United States, Europe, Asia, and Latin America, at least 30 of whom have double-digit years of experience. Every manager has responsibility for certain sectors and pairs with analysts who share their coverage. The group has endured modest turnover and is one of the most well-resourced in the industry.

Note: The People Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point), Morningstar maps the covered vehicle’s People Pillar ratings to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning People Pillar ratings to vehicles that follow the same strategy.

People

PGIM, the asset-management arm of Prudential Financial, has an attractive investment culture that has resulted in a strong lineup of funds, especially in fixed-income and growth equity. It earns an Above Average Parent rating. 
The PGIM funds are subadvised by at-scale subsidiaries of the firm that manage over USD 90 billion in assets each, mainly through Jennison Associates, PGIM Fixed Income, PGIM Quantitative Solutions, and PGIM Real Estate. The first two of these are standouts. Jennison runs the firm's actively managed fundamental equity funds with an established, repeatable investment process; PGIM Fixed Income, which includes Morningstar's Fixed-Income Fund Managers of 2017, remains well-resourced and risk-aware, while the early-2022 broadening of the leadership team has set the stage for sensible succession planning. PGIM Quantitative Solutions and PGIM Real Estate don't stand out as much but are still solid, though the former has dealt with several key management departures in recent years.
PGIM's lineup of 100-plus funds and ETFs spans the globe, but the firm’s assets are concentrated in the United States. At the end of June 2022, funds globally totaled USD 169 billion, only about 13% of PGIM's $1.3 trillion total assets under management; the rest is mostly in institutional accounts and the general account of Prudential's insurance company.

Parent

PGIM Floating Rate Income ETF

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By Michael Venuto Week of May 16, 2022 KPI Summary This week, the industry experienced 13 ETF launches and 1 closure, shifting the 1-year Open-to-Close ratio to 5.40 and total US ETFs to 2,945. ETF assets continue to trend down and haven't been current levels since Spring 2021.

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PGIM Investments continues to build out its actively managed fixed income ETF lineup with the launch of the PGIM Floating Rate Income ETF (NYSE Arca: PFRL). The new ETF, which seeks to maximize current income by investing primarily in senior floating rate loans, is managed by PGIM Fixed Income, a leveraged finance manager with $38 billion in [.

News for PGIM Floating Rate Income ETF ETF (PFRL)