JPMorgan Unconstrained Debt R5 JSIRX

The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.

The strategy’s management team earns an Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight debt with five- to seven-year maturities and government bonds compared with category peers. 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 Unconstrained Debt Fund earns an Above Average Process Pillar rating.

The leading factor in 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 noteworthy 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, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

Compared with other funds in the Nontraditional Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity 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 category average, the managers have been overweight debt with five- to seven-year maturities in recent years. In the latest month, the strategy has relatively overweighted debt with five- to seven-year maturities compared with its peers as well. Additionally, the managers have exhibited a sector bias towards government bonds over the past few years. Compared with category peers, however, the strategy had less government bonds exposure in the latest month. Finally, during the past few years, the fund leaned away from B rated bonds. In recent months, the strategy also had less exposure to B rated bonds compared to its peers.

This strategy has a modest 3.9% 12-month yield, lower than its average peers' 4.9%. In addition, it has a 5.0% 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 BB.

Robert Michele, 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 3.8 stars, indicating that their risk-adjusted returns outperformed the category average. Robert Michele is supported by an experienced team, being able to draw on four additional listed managers, who average over 30 years of listed portfolio management experience. As a team, they manage four investment vehicles together, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. The highest personal investment in this offering by any of its managers is at least$ 1 million. An investment of that size is large enough to align managers' interests with 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.

This share class led its average peer by an annualized excess return of 81 basis points over a 10-year period. And it also exceeded the return of the category benchmark, the ICE BofA US 3 Month Deposit OR CM Index, by an annualized 1.3 percentage points over the same period.

When risk is properly accounted for, the strategy is less compelling. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. The strategy also took on elevated risk, contributing to the bad outcome for investors. Specifically, the fund had a higher standard deviation, 3.2%, compared with the benchmark, 0.5%. 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.

It is good practice to weigh them heavily in any investment evaluation. This share class is within the cheapest quintile of its Morningstar Category. Its attractive fee, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class has high potential to deliver positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Silver.