The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  BNY Mellon Responsible Hrzns Corp Bd ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy's inexperienced portfolio management team drives the strategy's Below Average People Pillar, recently downgraded from Average. The strategy gets an Average Process Pillar rating.  The strategy's parent organization earns the firm an 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 aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. BNY Mellon Responsible Hrzns Corp Bd ETF earns an Average Process Pillar rating.    The most significant contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's impressive risk-adjusted performance, as shown by its average overall Morningstar Rating of 3.3 stars, also supports the process. Lastly, the process is limited by the experience of the management team, which averages two years at this fund.

 Compared with other funds in the Corporate 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. Compared with the category average, the managers have been meaningfully overweight corporate debt 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 overallocation to A rated bonds over the past few years. Compared with category peers, the strategy had more exposure to A rated bonds in the most recent month. Finally, during the past few years, the fund leaned meaningfully away from debt with 10- to 15-year maturities. In recent months, the strategy also had less exposure to debt with 10- to 15-year maturities compared to its peers.

 This strategy has a 4.7% 12-month yield, higher than its average peer's 4.2%. In addition, it has a 5.0% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). 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 BBB, compared with the category average of BB, and its non-investment-grade stake is 3% of assets, compared with its average peers' 33%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

Average

Process

BNY Mellon Responsible Hrzns Corp Bd ETF earns a Below Average People Pillar rating. The team benefits from its parent firm's five-year success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. However, the rating is held back by the instability of its management team. The fund last saw a manager change two years ago, which suggests that it could do more to retain its portfolio managers. Management team experience, which averages two years at this fund, also limits the team.

Below Average

People

BNY Mellon Investment Management, the asset-management arm of financial conglomerate Bank of New York Mellon, has been busy with changes since CEO Hanneke Smits ascended to her seat in October 2020. The firm’s seven wholly owned but autonomous investment affiliates mostly focus on distinct asset classes. Smits streamlined this arrangement in February 2021 by consolidating most of BNYIM’s active fixed-income and equity capabilities into two affiliates, Insight and Newton, respectively, and by trimming overlapping investment teams; further, the firm sold private-credit-focused Alcentra to Franklin Templeton in May 2022 partially because of that boutique’s operational complexity. Smits believes these organizational changes should help BNYIM’s affiliates manage their strategies more effectively. Yet the firm’s broad strategy lineup remains bloated owing in part to the affiliates’ openness to customized client requests regardless of asset size. 

Smits has sought to improve collaboration across the firm’s investment teams, including by pushing affiliate CEOs to replace “star managers” with comanagers on most strategies. This is a noteworthy effort, but it led to the departure of some managers who didn’t want to partake in the new model. Amid the uncertainty of how these and other changes ultimately shake out, the firm retains its Average Parent rating.

Parent

BNY Mellon Responsible Horizons Corporate Bond ETF

RHCB is an actively managed fund of global investment grade corporate bonds selected based on a combination of ESG evaluation, bottom-up credit analysis, and relative value assessment. 

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