PGIM Ultra Short Bond ETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in government bonds and debt with three- to five-year maturities compared with category peers. The management team invests alongside the strategy's shareholders, which helps it earn an 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 seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. PGIM Ultra Short Bond ETF earns an Average Process Pillar rating.    The largest contributor to the rating is the fund's impressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The process is limited by the parent firm's five-year retention rate of 72%, which suggests it could do more to hold onto its portfolio managers.

 Compared with other funds in the Ultrashort Bond Morningstar Category, this fund takes on lower credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer 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 government bonds in recent years. In the latest month, the strategy has also relatively underweighted government bonds compared with Morningstar Category peers. Additionally, there's been a bias away from debt with three- to five-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with three- to five-year maturities than peers. Finally, during the past few years, the fund leaned away from B rated bonds. Nevertheless, the fund's B rated bonds exposure was in line with peers in the latest month.

 This strategy has a 5.5% 12-month yield, higher than its average peer's 4.7%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 5.2%. 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 has a higher average surveyed credit quality of AA, compared with the category average of A, and it holds no non-investment-grade assets, despite the average peers' 1%. Strategies that take on less credit risk can often weather more-adverse market conditions.

Average

Process

PGIM Ultra Short Bond ETF earns an Average People Pillar rating. The most meaningful contributor to the rating is the strategy's costs, which rank in its category's least costly fifth. Fees detract from net returns, so the team has a lower expense hurdle to overcome. The size of the portfolio management team also contributes to the rating. With three portfolio managers, the fund is reasonably well-resourced. Lastly, the rating is limited by the parent firm's five-year retention rate of 72%, which suggests it could do more to retain its portfolio managers.


Joseph D'Angelo, the longest-tenured manager on the strategy, boasts 18 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 5.0 stars, indicating that their risk-adjusted returns outperformed the category average. The management team is invested in the fund, but the maximum investment by any manager is between $500,000 and $1 million. An investment of more than $1 million would be ideal to align managers' interests with those of the fund's investors.

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.

Above Average

Parent

PGIM Ultra Short Bond ETF

PULS is an actively managed bond fund that specializes in short-term, high-credit-quality debt securities denominated in US dollars. The fund seeks total return that is consistent with capital preservation.

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The PGIM Ultra Short Bond ETF offers short-duration bond exposure for investors concerned about stock and bond sell-offs. PULS holds a mixed portfolio of high-quality, short-term bonds issued by the U.S. government, corporations, and foreign entities. PULS has shown competitive performance and offers diversification, lower risk, and steady income, but is subject to interest rate and default risks.

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Interest rates have been a hot topic for investors following the recent FOMC meeting. PULS offers a modestly riskier approach to ultra-short bond investing. Because of the high yield and capital appreciation potential, I rate PULS a strong buy.

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Part 2 of this guide to ultra-short-term bond ETFs discusses BIL, PULS, and JPST, highlighting their pros, cons, and suitability for different types of investors. The ETFs are attractive because they offer a low-risk and high-yield investment. However, they differ in volatility, yield, and capital appreciation potential. Most investors should own an ultra-short-term bond ETF due to the favorable risk-reward ratio, but the choice of ETF depends on individual risk tolerance and investment outlook.

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The PGIM Ultra Short Bond ETF offers a safe investment option with a high yield of 4.9% for investors expecting a recession. PULS has a diverse portfolio of high-quality short-term bonds, with 75% of its holdings in A-rated bonds or better. PULS has advantages over other ETFs, such as potential for capital appreciation and less reinvestment risk, making it a recommended Buy.

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The PGIM Ultra Short Bond ETF is a suitable cash parking vehicle due to its short duration, granularity, and investment-grade quality of collateral. The fund has outperformed its competition in the past year, with a 30-day SEC yield close to 5%. PULS is a headache-free way for retail investors to take advantage of higher rates, as it is a mix of corporate bonds and ABS securities, providing a high level of granularity and diversification.

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Today’s low-yield environment is increasing the allure of high-yielding fixed-income assets, but plenty of investors still like the safety and added income of short-term bond funds. Just look at the  PGIM Ultra Short Bond ETF (NYSEArca: PULS).

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Launched in May of 2018, Prudential's PULS ETF has earned short-term income investors 2.75% YTD with investment grade risk.

News for PGIM Ultra Short Bond ETF ETF (PULS)