JPMorgan U.S. Applied Data Sci Val R2 JIVZX

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

The strategy’s management team earns an Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight volatility exposure and liquidity exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. 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 U.S. Applied Data Science Value earns an Above Average Process Pillar rating.

The leading factor in 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 outperformed 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 the number of months that the management team has been running this vehicle together.

This strategy targets smaller plays than its peers’ average in the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it is similar. Looking at additional factor exposure, this strategy has consistently overweighted the volatility factor compared with Morningstar Category peers over the last few years, meaning it invests in stocks with a history of the higher standard deviation of returns. Such exposure tends to pay off when markets are hot and to be costly when they are not. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. This strategy has also been exposed to liquid stocks during these years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. In this month, the strategy also had more exposure to the Yield factor over 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 has allocations in its top two sectors, industrials and healthcare, that are similar to the category. The sectors with low exposure compared to category peers are technology and consumer defensive, with technology underweighting the average portfolio by 3.5 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 104 holdings and is diversified among those holdings. In its most recent portfolio, 20.9% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category average's 27.4%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 17% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

The team is backed by Wonseok Choi, the longest-tenured manager on the strategy, who provides 18 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, indicating that their risk-adjusted returns have been in line with the category average. Wonseok Choi draws on only two other listed supporting managers. Although, together they are adequately equipped, with nine years of average listed portfolio management experience. The highest personal investment in the fund by any of its managers is between$ 100,000 and$ 500,000. That's on the low side--it would need to be more than$ 1 million for us to see the investment as sufficient to promote the strong alignment of 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.

Over the past eight-year period, this share class performed equivalently to the category's average 10.7% return. But if extended to a 10-year time period, it underperformed the average by 20 basis points. It continued its mixed performance compared with the category index, Russell 1000 Value Index, where it exceeded the index by 18 basis points over an eight-year period and lagged it by 47 basis points over a 10-year period.

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. This subpar risk-adjusted performance has not resulted in higher volatility, as measured by their standard deviation, which is close to the benchmark. 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.

This share class is in the second-costliest quintile of its Morningstar Category. Its unattractive expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class could struggle to produce positive alpha relative to its category benchmark, leading to its Morningstar Medalist Rating of Neutral.