A sound investment process and strong management team underpin SPDR® Portfolio Corporate Bond ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy merits an Above Average Process Pillar rating. The strategy’s management team earns an Above Average People 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

The fund tracks the Bloomberg U.S. Corporate Bond Index, which sweeps in investment-grade bonds from corporate issuers. Eligible bonds must be U.S.-dollar-denominated with a minimum par amount outstanding of $300 million and a fixed coupon rate. The index excludes contingent capital securities with explicit balance-sheet-based triggers, bonds with equity features (warrants, preferred, and so on), and municipal securities. It weights selected bonds by their market value and rebalances monthly.

Market-cap weighting reflects the issuance activities in this category, which has mostly been in the lower rungs of the investment-grade segment. Nearly half of the fund’s portfolio tends to be invested in BBB rated bonds, which is in line with the category average. However, the fund is overweight in A rated bonds, parking around 40% of its portfolio in these issues, while the average category peer tends to allocate only around 25%-30%. Category peers can also take small steps outside of the investment-grade space and invest a small portion of their portfolio in BB bonds. As a result, the fund takes on slightly less credit risk than the category average, which should help during credit shocks. 

The fund’s average duration is slightly higher than that of its category peers, as it slightly overweights bonds at the longer end of the maturity curve. As of August 2022, its average effective duration was around 7.5 years versus 7.2 years for the category average. 

Despite these differences, the fund’s sector allocations closely resemble that of the opportunity set in its category. Nearly one third of its assets tend to be invested in bonds from financials sector firms, reflecting the issuance activity in the investment-grade credit space.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.

Above Average

Process

SPDR® Portfolio Corporate Bond ETF's strong team drives the strategy's Above Average People Pillar rating. There are three managers listed on the fund: Michael Brunell, Frank Miethe, Christopher DiStefano. Experience on the team is abundant, with 14 years of average portfolio management experience. Though they do not manage other products together, managers may manage them individually.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

SPDR Portfolio Corporate Bond

SPBO tracks an index of investment-grade US corporate bonds weighted in tiers by market value and issuer fundamentals.

SPDR Portfolio Corporate Bond ETF offers access to high-quality investment-grade corporate bonds with a diverse and broad-based portfolio. SPBO's holdings primarily consist of investment-grade corporate bonds with low default rates, providing a relatively safer investment option. The ETF has a high yield and potential for long-term capital appreciation, making it an attractive choice for income investors.

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SPBO offers an attractive yield of 6% and a high-quality investment grade portfolio. The fund has declined significantly in 2022 and is still exhibiting weakness in 2023, but income investors should see this as a buying opportunity. Market fears, such as an economic recession, may negatively impact investment grade corporate bonds, but investors should take advantage of the opportunity to accumulate more shares.

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