JPMorgan Mortgage-Backed Securities ETF JMTG

The merits of JPMorgan Mortgage-Backed Securities ETF remain intact amid an early 2026 Morningstar Category change to securitized bond—diversified from intermediate core bond.

Management experience and expertise underpin confidence in the strategy’s continued success. The April 2026 retirement of longtime manager Michael Sais marked the loss of more than three decades of experience, but the firm executed a well-planned succession by giving plenty of lead time and adding securitized specialist Sajjad Hussain as comanager more than a year prior in November 2024. Hussain, formerly head of securitized research, complements veteran managers Rick Figuly and Andy Melchiorre, whose specialties align closely with the strategy’s mortgage-backed securities focus.

A disciplined, mortgage-focused approach and strong security-selection capabilities help this process stand out. While J.P. Morgan expanded the strategy’s flexibility to invest in other MBS structures in 2025, these changes did not materially alter its conservative risk profile. J.P. Morgan’s hallmark approach to MBS investing emphasizes securities with stable cash flows and favorable prepayment characteristics, relying on detailed bottom-up analysis, relative-value assessments, and close collaboration among portfolio managers, analysts, and securitized specialists. Agency MBS remains the portfolio’s foundation, typically accounting for 65%–80% of assets, complemented by allocations to nonagency MBS, commercial MBS, asset-backed securities, Treasuries, and cash. The managers prioritize specified pools over generic pass-throughs and use mortgage derivatives sparingly.

This exchange-traded fund has a more conservative profile versus its new securitized bond—diversified peers. The June 2026 portfolio had more than 80% of assets rated AAA, far exceeding the 15% peer median. Recent positioning reflects tighter spreads in agency mortgages and more attractive opportunities in nonagency residential MBS and CMBS. Duration (a measure of interest rate sensitivity) generally tracks the Bloomberg US MBS Index and currently runs slightly longer than both the benchmark and peer norm, reflecting the team’s expectations for a range-bound interest rate environment.

The ETF’s approach has produced attractive long-term results, particularly versus its benchmarks. Since Figuly joined in October 2015, the strategy’s 2.3% annualized return through June 2026 outperformed both the Bloomberg US MBS Index and the Bloomberg US Securitized MBS ABS CMBS Index category benchmark by roughly 70 basis points, though it modestly trailed the median peer. A higher-quality portfolio has historically provided good downside protection during periods of market stress; it ranked ahead of more than 80% of peers during the late-2018 credit selloff, the March 2020 pandemic drawdown, and the March 2023 banking crisis. The portfolio’s contours have contributed to strong long-term risk-adjusted results, although recent rankings have moderated as lower-volatility markets have favored riskier exposures.

Correction (Aug. 26, 2026): This report was updated to correct Sajjad Hussain's, Rick Figuly's, and Andy Melchiorre's ownership in the strategy.

The team's meticulous security selection and effective risk management merit an Above Average Process rating.

In concert with the strategy's June 27, 2025, conversion to an ETF from a mutual fund, J.P. Morgan added the flexibility to invest in private placements and zero-coupon securities and removed a 10% cap on investments in subprime mortgage-related securities at the time of purchase. These changes give the managers more leeway without materially altering the approach or the portfolio’s risk profile.

The ETF emphasizes MBS with relatively stable cash flows and prepayment protection. J.P. Morgan's quarterly investment meeting sets macroeconomic themes for the subsequent three to six months, while weekly sector meetings surface relative-value ideas and tactical portfolio positioning. Daily collaboration among the managers, securitized specialists, and analysts helps the team's best ideas to make it into the portfolio. The managers’ selectivity ensures the overall portfolio is well constructed. Focusing on underlying pool analysis, cash flow stability, and relative value, they prefer MBS structures that limit prepayment sensitivity and steer clear of generic pass-throughs and TBA forward contracts in favor of specified pools with specific characteristics. This approach results in a resilient portfolio.

The managers use the Bloomberg US MBS Index as a reference point when building the portfolio. Stakes in a variety of agency mortgage-backed assets make up the bulk of the portfolio (65%–80%), while the remainder (10%–30%) spans Treasuries, CMBS, nonagency MBS, and mortgage-related ABS. The team treats duration and yield-curve positioning as secondary considerations: it keeps duration within a year of the MBS benchmark, whose duration typically shifts more than that of the Bloomberg US Aggregate Bond Index (on account of prepayment risk) and normally runs shorter than most of the peer group norm. The managers also use mortgage derivatives, such as principal- and interest-only bonds, in moderation, owing to the higher volatility of these structures.

The ETF’s MBS emphasis is more in line with its new securitized bond—diversified category. However, this strategy’s focus on investment-grade bonds differentiates it from its typical rival.

The most telling feature is its allocation to AAA rated debt. As of June 2026, the ETF’s 80.4% stake in these highest-rated bonds, which was near its long-term average, was significantly higher than the 14.8% of the median peer. As such, most category peers will have a yield advantage over this ETF, although it maintains a higher yield than its Bloomberg US MBS Index. The managers will still implement their consistent relative value approach and make active portfolio adjustments when opportunities are present.

Finding compelling relative value opportunities has been challenging more recently. The team can still find good value in certain areas of the MBS universe. The ETF’s approximately 71% of assets allocation in agency MBS, which includes 54% to RMBS and 17% to CMBS, as of June 2026, was less by about 5 percentage points versus a year prior. Instead, the managers have more attractive spreads in nonagency RMBS (13.6%) and CMBS (12.3%). Smaller allocations to Treasuries, mortgage-related ABS, and cash round out the portfolio.

The ETF’s duration will move in tandem with the index, which has greater variability than the Aggregate Index, for example, depending on the outlook for prepayments. The strategy is often longer in duration than most peers. The June 2026 portfolio’s 5.6-year duration was about 0.25 years longer than the benchmark and about 0.6 years longer than the peer median, reflecting expectations for range-bound long-term yields.

This ETF's seasoned managers ply their MBS expertise while drawing on the deep supporting resources of J.P. Morgan's fixed income platform, earning the strategy a High People rating.

J.P. Morgan lost more than three decades of experience after comanager Michael Sais’ April 2026 retirement; while his role was not primary to the ETF's day-to-day decisions, he still provided important input. This demonstrated a thoughtful succession plan, announcing Sais’ departure more than a year prior. In preparation, J.P. Morgan tapped securitized specialist Sajjad Hussain as a comanager on the ETF in November 2024. Hussain recently became a portfolio manager after serving as head of securitized research, and his deep securitized experience fits the ETF's focus on mortgage-backed debt well. He makes a strong complement to J.P. Morgan mainstay Rick Figuly and securitized expert Andy Melchiorre. Figuly started at J.P. Morgan in 1993, joined the strategy in 2015, and rose to head of the US core bond team in late 2019. The firm added Melchiorre to the roster in 2019; his industry experience began in 2008.

Alongside the managers, the firm's large network of fixed income specialists helps guide macro positioning and contributes bottom-up ideas and security selection. Experience matters when sourcing and selecting bonds that meet the team's stringent standards. The managers conduct much of their bottom-up research and trading themselves but also draw on specialized portfolio managers and a growing team of securitized analysts, especially for nonagency debt. A nine-person fundamental research cohort handles securitized analysis and surveillance and collaborates closely with the managers on investment ideas. This tight-knit team jointly makes portfolio decisions and works out any differences with the portfolio's best interests in mind.

Manager ownership, which fosters alignment with investors, is strong. Figuly invests more than USD 1 million, Melchiorre between USD 500,001 and USD 1 million, and Hussain between USD 100,001 and USD 500,000 in the strategy.

J.P. Morgan continues to build a track record of strong stewardship, supporting a Parent rating upgrade to High from Above Average.

With more than USD 4 trillion in assets under management (including USD 1.3 trillion in money market funds) and a broad reach, J.P. Morgan is among the largest active asset managers in the US, Europe, and Asia. Although some multi-asset offerings have struggled over the past five years, prompting new leadership to make changes to investment teams, its equity and fixed-income teams boast long-tenured portfolio managers who practice repeatable investment processes that have generally produced strong long-term results. Most of its funds are core building blocks with long lifetimes, though its lineup around the world also includes more-specialized options: Two options-based equity-income exchange-traded funds, launched in 2020 and 2022, are now among the firm’s largest. J.P. Morgan has been an early mover in offering active ETFs, having converted 12 of its open-end mutual funds to the structure and launching others. It isn’t always at the forefront of emerging trends. While it has filed registration statements with the Securities and Exchange Commission for an interval fund and an ETF investing in private markets, it hasn’t yet introduced such an option for all investors, whether on its own or in partnership with another asset manager, unlike some of its closest competitors.

To support the firm’s diverse investment offerings, J.P. Morgan has invested heavily in both portfolio management tools and its client organization. Over the past 10 years, the firm has developed robust proprietary technology with advanced analytics and broad buy-in from investment analysts, portfolio traders, and portfolio managers, all of whom have easy access to the platform. The firm also stands apart for its demonstrated commitment to clients. In the early 2000s, J.P. Morgan began pivoting its engagement with financial advisors to adopt a more consultative approach, supported by its sought-after Guide to the Markets research series that focuses on investor education, not product pitches. This perspective can help clients stay the course, supporting positive investor outcomes.

Incentives reinforce alignment with fundholders. Beginning more than 10 years ago, investment team compensation is tied to three-, five-, and 10-year performance, and portfolio managers must invest at least half of their deferred compensation in J.P. Morgan strategies. Many firms encourage portfolio managers to invest alongside fundholders, but J.P. Morgan goes a step further in requiring client-facing individuals to invest substantial portions of their incentive compensation in the funds.

Although some funds still face high cost hurdles, more than half of share classes charge competitive fees relative to peers.

The ETF’s new securitized bond—diversified category has changed its performance ranking versus a smaller group of peers who typically take more credit risks.

Although the strategy's cautious style sets it apart from most peers, it has generated compelling results versus its Bloomberg US MBS Index and the Bloomberg US Securitized MBS ABS CMBS Index category benchmark. Over the comanager Rick Figuly’s tenure in October 2015, his first full month, the ETF’s 2.3% annualized return through June 2026 beat both benchmarks, each of which returned about 1.6% annualized. The ETF trailed the peer median by about 25 basis points over this period, a byproduct of its judicious portfolio.

This high-quality portfolio thrives versus most peers in periods of credit stress. For instance, during the high-yield selloff in late 2018, the pandemic-driven drawdown in March 2020, and the March 2023 banking crisis, this strategy held up better than 80% of rivals. Specifically, during the 2020 drawdown period, the ETF’s 1.7% loss was less severe than the peer median by more than 4 percentage points.

The ETF's MBS focus has also dampened volatility versus the category index. Over the trailing five years, which has been marked by heightened bond market volatility, the strategy’s 5.8% annualized standard deviation was about 1 percentage point less than the benchmark’s. Long-term risk-adjusted statistics are strong, too. Its Information Ratio, a measure of excess returns relative to the volatility of those excess returns, is among the category’s highest over Figuly’s tenure. Granted, it has fallen recently to near the median, but that’s largely a result of a lower-volatility environment that favors riskier bonds.

JPMorgan Mortgage-Backed Securities ETF's Prospectus Adjusted Expense Ratio is 0.24% per year. It places it in the cheapest quintile of the Morningstar US Fund Securitized Bond - Diversified Category, where the median fee is 0.66% per year. This cost positioning translates into a Medalist Rating Price Score of 2.33, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.