JPMorgan Mid Cap Equity Fund earns an Above Average Process Pillar rating.
The most important driver of the rating is the fund's impressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 57% also bolsters the rating. 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 impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. 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.
This strategy skews toward larger, more growth-oriented companies compared with its average peer in the Mid-Cap Blend Morningstar Category. Examining additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy also has held illiquid stocks, evidenced by holdings' lower trading volume in recent years over peers, resulting in high liquidity risk exposure. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. Similarly, in recent months, the strategy also had less exposure to the Liquidity factor than peers. In addition, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. In recent months, the strategy also had less Volatility factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.
The portfolio is overweight in financial services by 3.0 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are basic materials and industrials; however, the allocations are similar to the category. The portfolio is positioned across 204 holdings and its assets are more dispersed than peers in the category. In particular, 12.3% of the strategy's assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 15.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 40% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.