JPMorgan Strategic Income Opports I JSOSX

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

The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in B rated bonds and has a substantial underweight in debt with 20- to 30-year maturities 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 Strategic Income Opports Fd earns an Above Average Process Pillar rating.

The main contributor to 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. Strong risk-adjusted performance also bolsters 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, such as 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 underweight B rated bonds in recent years. In the latest month, the strategy has also relatively underweighted B rated bonds compared with Morningstar Category peers. Additionally, there's been a notable bias away from debt with 20- to 30-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with 20- to 30-year maturities than peers. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

This strategy's 12-month yield is 4.9%, which is near its average peer. It also has a 5.1% 30-day SEC yield (a measure similar to yield-to-maturity). The portfolio holds assets with a higher average surveyed credit quality of BBB, compared with the category average of BB, and 4% of the strategy's assets are rated non-investment-grade compared with its average peers' 24%. Strategies with lower credit risk can typically withstand market turmoil more effectively.

William H. Eigen’s veteran status, with 23 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 3.5 stars, demonstrating encouraging risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 20 years of listed portfolio management experience. At least one member of the team has invested$ 1 million or more of their own capital in the fund, which helps align 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 a 10-year period, this share class outperformed the category’s average return by 47 basis points annualized. And it also beat the category index, the ICE BofA US 3 Month Deposit OR CM Index, by an annualized 78 basis points over the same period.

When adjusting for risk, the fund is not as favorable. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. Unfortunately, the fund took on higher risk, as measured by the variance of returns. Specifically, the strategy had a higher standard deviation, 2.2%, versus 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 lands in the second-cheapest quintile of its Morningstar Category. Its low expense ratio, paired with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Bronze.