Putnam ESG High Yield ETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy earns an Average Process Pillar rating, the result of a recent pillar downgrade from Above Average. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in B rated bonds and an overweight in cash compared with category peers. The strategy’s management team earns an Average People Pillar rating. 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 High Yield ETF earns an Average Process Pillar rating.    The most substantial contributor to the rating is the experience of the management team, which averages 26 years at this fund. The stability of talent across its parent firm also supports 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 disappointing 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 High Yield Bond Morningstar Category, this fund consistently holds a significantly larger cash position over the past few years. But in terms of long-term interest-rate sensitivity, it does not have a portfolio bias and hews closely to peers. 

 This strategy's 12-month yield is 7.4%, higher than its average peer's 6.3%. Higher yields tend to indicate 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 has a higher average surveyed credit quality of BB, compared with the category average of B. Strategies that take on less credit risk can often weather more-adverse market conditions.

Average

Process

Putnam ESG High Yield ETF earns an Average People Pillar rating. Robert L. Salvin’s veteran status, with over 25 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.7 stars, indicating that their risk-adjusted returns have been in line with the category average. Robert L. Salvin has an experienced listed co-manager. Together, they average over 25 years of listed portfolio management experience. As a team, they manage six investment vehicles together, with mixed prospects. The asset-weighted average Morningstar Medalist Rating across the strategies is Neutral. This means, in aggregate, they are not positioned to deliver positive alpha. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

 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

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