JPMorgan Diversified Fund earns an Above Average Process Pillar rating.
The most important driver of the rating is the parent firm's five-year risk-adjusted success ratio of 56%. 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. Strong risk-adjusted performance also strengthens 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, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.
This strategy maintains a fixed-income weighting similar to Moderate Allocation peers, but holds more assets in equities, with a 34% to 62% fixed-income to equity composition. Its equity sleeve maintains a persistent bias to growth stocks versus the category average. Although in terms of market-cap exposure, it moves close to the rest of the pack. The strategy has three region or sector biases compared to category peers. The most noteworthy bias is a consistent overweight in the Developed Europe region. It also maintains an overweight bias toward the financial services sector. And finally, in the fund's most recent portfolio, less assets were allocated to developed markets regions. Although, this bias has not existed over time.
The portfolio is overweight in consumer cyclical by 3.2 percentage points in terms of assets compared with the category average, and its financial services allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and healthcare; however, the allocations are similar to the category. The portfolio is overweight in Developed Europe and Developed Asia regions relative to the category average by 8.7 percentage points and 3.2 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Middle East and Africa, with North America underweight the average by 17.3 percentage points and Middle East and Africa
similar to the average.