JPMorgan Emerging Markets Debt C JEDCX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.

The strategy receives an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in B rated bonds and an underweight in corporate bonds compared with category peers. The strategy's management team has a high retention rate, which helps continuity and earns it an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Emerging Markets Debt Fund earns an Average Process Pillar rating.

The largest contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 56% also influences the rating. 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. Their commendable success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the process has struggled over that period.

Compared with other funds in the Emerging Markets Bond Morningstar Category, this fund has been consistently sensitive to interest-rate changes 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. Relative to the average strategy in the category, the managers have been overweight B rated bonds in recent years. In the latest month, the strategy has relatively overweighted B rated bonds compared with its peers as well. Additionally, the managers have exhibited a sector bias away from corporate debt over the past few years. Similarly, in recent months, the strategy also had less exposure to corporate bonds than peers. Finally, during the past few years, the fund leaned meaningfully towards debt with 20- to 30-year maturities. Nevertheless, the fund's debt with 20- to 30-year maturities exposure was in line with peers in the latest month.

This strategy's 12-month yield is 4.8%, lower than its average peers' 5.9%. In addition, it has a 5.5% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). A lower yield tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated BB.

The main contributor to the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 3.3 stars. The stability of the management team also influences the rating. Specifically, the fund has not seen a manager change in the last nine years. Lastly, the rating is limited because no manager has invested more than$ 1 million in the fund, which would align their interests with fundholders.

Pierre-Yves Bareau, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, demonstrating average risk-adjusted performance. Despite having a small team, the two listed managers boast 19 years of listed portfolio management experience.

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.

Specifically, over the past 10-year period, this share class trailed its category's average return by an annualized 62 basis points. It was also not able to outpace the category benchmark, JPMorgan Emerging Markets Global Diversified Bond Index, where it trailed by an annualized 2.0 percentage points over the same period.

Even when adjusting for risk, the fund is not favorable. The share class failed to beat the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. However, this strategy hewed close to the benchmark's standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

It is good practice to weigh them heavily in any investment evaluation. This share class sits in the costliest quintile of its Morningstar Category. Its high fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class could struggle to deliver positive alpha relative to its category benchmark, leading to its Morningstar Medalist Rating of Neutral.