JPMorgan Strategic Income Opports A JSOAX

The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.

The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar 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.

JPMorgan Strategic Income Opports Fd earns an Above Average Process Pillar rating.

The primary 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. Excellent risk-adjusted performance also contributes to the process. This can be seen in 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. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

Compared with other funds in the Nontraditional 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 average strategy in the category, the managers have been underweight B rated bonds in recent years. In the latest month, the strategy has also relatively underweighted B rated bonds compared with Morningstar Category peers. Additionally, there's been a notable bias away from debt with 20- to 30-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with 20- to 30-year maturities than peers. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

This strategy's 12-month yield is 4.6%, lower than its average peers' 4.9%. It also has a 4.6% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, a lower yield comes with the benefit of less credit risk. The portfolio has a higher average surveyed credit quality of BBB, compared with the category average of BB, and 4% of the strategy's assets are rated non-investment-grade compared with its average peers' 24%. Lower-credit-risk strategies are often able to navigate bear markets more effectively.

William H. Eigen’s veteran status, with 23 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 3.5 stars, demonstrating encouraging risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 20 years of listed portfolio management experience. At least one member of the team has invested$ 1 million or more of their own capital in the fund, which helps align their interests with the strategy's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various global cohorts and diverse asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

It has been challenged over the short term but strong over the long term. Over the past five years, the fund trailed the category index, the ICE BofA US 3 Month Deposit OR CM Index, by 17 basis points, and equaled the category average. More importantly, on a 10-year basis, this share class outperformed the index by an annualized 52 basis points.

The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. In addition to the poor risk-adjusted performance, the strategy also delivered a bumpy ride for investors with a higher standard deviation of returns, 2.2%, compared with the benchmark, 0.5%.

This share class levies a fee that ranks in its Morningstar Category's middle quintile. Despite this fee, the fund’s People, Process, and Parent Pillars indicate this share class can produce positive alpha relative to its category benchmark, earning it a Morningstar Medalist Rating of Bronze.