JPMorgan Floating Rate Income R6 JPHRX

The portfolio maintains a cost advantage over competitors, priced within the cheapest fee 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 an overweight in corporate bonds and BB rated bonds compared with category peers. The strategy’s management team earns an Above Average People 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 Floating Rate Income Fund earns an 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 beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's impressive risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also strengthens the process. 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 index, which suggests that the process has struggled over that period.

Compared with other funds in the Bank Loan 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. Compared with the average strategy in the category, the managers have been an overweight corporate debt in recent years. In the latest month, the strategy has relatively overweighted corporate debt compared with its peers as well. Additionally, there's been a notable overweight bias towards BB rated bonds over the past few years. Compared with category peers, the strategy had more exposure to BB rated bonds in the most recent month. Finally, during the past few years, the fund leaned towards debt with three- to five-year maturities. In this month, the strategy also leaned more towards debt with three- to five-year maturities compared with its peers.

This strategy's 12-month yield is 8.1%, lower than its average peers' 8.5%. It also has an 8.3% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, a lower yield comes with the benefit of less 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 B.

James P. Shanahan’s veteran status, with over 25 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 3.0 stars, indicating that their risk-adjusted returns have been in line with the category average. James P. Shanahan has an experienced backdrop of support. The three listed managers boast 15 years of average listed portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between$ 500,000 and$ 1 million. An investment of more than$ 1 million would be ideal to align managers' interests with those of the fund'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 provided varied returns compared with peers, but poor returns compared with the category benchmark. Over the past eight-year period, this share class performed equivalently to the category's average 4.6% return. But if extended to a 10-year time period, it underperformed the average by 18 basis points. However, it was more difficult to outpace the category index, S&P/ LSTA Leveraged Loan Index, where it lagged by an annualized 1.3 percentage points over the same 10-year period.

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 stayed in line with the benchmark's standard deviation. However, the share class proved itself effective by generating positive 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 imposes a fee that places it in its Morningstar Category's cheapest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars suggest this share class should not be able to deliver positive alpha relative to its category benchmark, garnering a Morningstar Medalist Rating of Neutral.