Key Morningstar Metrics for JPMorgan Ultra-Short Income ETF
- Morningstar Medalist Rating: Silver
- Process Pillar: Above Average
- People Pillar: High
- Parent Pillar: Above Average
Launched in May 2017, JPMorgan Ultra-Short Income ETF JPST has grown to more than $24.5 billion, making it now the largest actively managed fixed-income exchange-traded fund. Higher short-term yields no doubt have helped fuel this ETF’s popularity, but so too have the ETF’s team, investment approach, and reliable performance pattern. Depth, stability, and solid decisions help this ETF’s tenured team stand out from rivals, earning it a recent People rating upgrade to High from Above Average.
James McNerny has led this offering since its inception and leads this strategy day to day. He joined J.P. Morgan in 2000 and focuses exclusively on short-term strategies. McNerny collaborates with managers David Martucci, Cecilia Junker, and Kyongsoo Noh, who average more than 25 years of industry experience. The comanagers also draw on the vast resources of the firm’s Global Fixed Income, Currency, and Commodities platform, which includes 21 investment-grade corporate-bond and eight securitized analysts who inform security selection. They are thus able to make effective and thoughtful decisions across traditional cash markets and bonds that mature beyond one year.
The ETF’s conservative approach builds on the firm’s long history of managing ultrashort and liquidity strategies for institutions. The team’s time-tested process emphasizes bottom-up security selection but also takes cues from the firm’s macro forecasts. Relative value assessments between traditional cash markets and debt maturing beyond one year, and the outlook for liquidity drive portfolio positioning. This helps the team beat prime money market funds while limiting potential losses and maintaining ample liquidity. Duration (a measure of interest-rate sensitivity) stays shorter than one year, but it fluctuated between 0.25 and 0.75 years recently. Investment-grade corporate bonds and securitized debt receive the most focus despite these sectors’ absence from the strategy’s ICE BofA 3-Month US Treasury Bill Index.
On the whole, the ETF’s strengths, including an 18-basis-point expense ratio, one of the category’s lowest, make it an excellent option.
JPMorgan Ultra-Short Income ETF: Performance Highlights
The strategy has delivered compelling absolute and risk-adjusted results while protecting better than most peers in down periods. Since the ETF’s May 2017 inception, its 2.5% annualized gain through June 2024 beat its distinct ultrashort bond Morningstar Category peer median’s 2.3%, ranking near the top quartile. The strategy’s top-decile volatility-adjusted performance, as measured by Sharpe ratio, was even better. This downside protection was on display in 2022 when rates spiked following the beginning of the Russia-Ukraine war. The ETF’s 0.37% first-quarter loss was less severe than its peer median’s 0.71% drop. As markets settled in, the ETF’s shorter duration fueled its 1.06% calendar-year gain, ahead of its typical rival by about 1 percentage point. The strategy’s conservative positioning also helped limit the downside during the pandemic-driven volatility in March 2020 when its 1.56% drawdown was less harsh than its average rival’s 1.74% loss.
The ETF may lag in periods favorable to credit risk, like in 2023. During the calendar year, the strategy’s 5.16% return trailed its peer median’s 5.76% but landed ahead of the 4.12% for the category’s Bloomberg Gov/Corp 1-Year Duration Index. A conservative approach and avoidance of below-investment-grade debt did not keep up with peers that took more credit risk that year.
