A strong management team and sound investment process underpin T. Rowe Price QM US Bond ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 Confidence in the strategy's portfolio management drives a High People Pillar rating. The strategy's effective investment approach earns a High Process Pillar rating.  The strategy's parent organization earns the firm a High 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 style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. T. Rowe Price QM U.S. Bond ETF earns a High Process Pillar rating.    The primary contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.5 stars. The parent firm's five-year risk-adjusted success ratio of 59% also contributes to the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their commendable success ratio suggests that the firm does well for investors and that this fund may benefit from that. Excellent risk-adjusted performance also strengthens the process, as shown by the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk.

 Compared with other funds in the Intermediate Core 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. Relative to the average strategy in the category, the managers have been underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, there's been a notable overweight position in debt with 15- to 20-year maturities over the past few years. Compared with category peers, the strategy had more exposure to debt with 15- to 20-year maturities in the most recent month. Finally, during the past few years, the fund leaned meaningfully away from cash. In recent months, the strategy also had less exposure to cash compared to its peers.

 This strategy's 12-month yield is 3.8%, higher than its average peer's 3.6%. In addition, it has a 4.5% 30-day SEC yield (a measure similar to yield-to-maturity). 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 holds assets with a higher average surveyed credit quality of AA, compared with the typical peers' A, and it holds no non-investment-grade assets, despite the average peers' 1%. Lower-credit-risk strategies are often able to navigate bear markets more effectively.

High

Process

T. Rowe Price QM U.S. Bond ETF earns a High People Pillar rating. The primary contributor to the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 3.5 stars. The stability of the management team also contributes to the rating. Specifically, the fund has not seen a manager change in the last two years. Low costs, with fees that rank in its category's cheapest quintile, strengthen the rating as well. Fees reduce net returns, so the managers have a lower expense hurdle to overcome.

People

T. Rowe Price remains an adaptable, trustworthy steward of capital, earning a High Parent rating. A $1.4 trillion asset base gives this time-tested firm a scale and presence few can match, but its heft has made it tougher for its equity strategies to build up positions in small- and mid-cap stocks without pushing against firm-level ownership limitations. To address this challenge, the firm split into two distinct research entities in March 2022. Six strategies, including five capacity-constrained equity strategies, moved to the new division, T. Rowe Price Investment Management, while the rest of the firm now exists as T. Rowe Price Associates. From 2019 to 2021, the firm bolstered its topnotch equity analyst team with new hires to fortify each division's research resources and ensure an orderly transition.

T. Rowe Price added to its array of offerings by acquiring alternative credit specialist Oak Hill Advisors in 2021. T. Rowe has seldom grown inorganically, but the move expanded its capabilities and helped diversify its asset base. Equities remain T. Rowe's strength. It would like to grow its fixed-income business, though that segment remains a step behind peers; it only recently hired dedicated risk personnel in that area.

While the shift to passive investing continues to challenge active managers, T. Rowe Price's impressive bench of investment talent, prudent corporate management, and relatively low fees continue to give it an advantage.

Parent

T Rowe Price QM US Bond ETF

TAGG is an actively-managed fund that holds a wide array of USD-denominated investment-grade bonds with broad maturities.

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