JPMorgan Value Advantage C JVACX

At the right price, JPMorgan Value Advantage has a chance to deliver value for investors thanks to an experienced and successful investment staff.

With longtime lead manager Jonathan Simon slated to hand over control of this strategy in July 2024 and retire in early 2025, a different pair of capable hands takes the wheel. Scott Blasdell, who has posted strong results at JPMorgan Large Cap Value HLQVX for more than a decade, will assume control, ushering in a new era for this all-cap offering. Blasdell is a 25-year veteran of J.P. Morgan and brings over his small team of experienced large-cap analysts to join comanager Graham Spence and a dedicated small-mid value analyst team. Spence was hired in 2013 as an assistant to Simon and became comanager in 2020. He’ll play a key role in this new combination given his ties to the previous lead manager and familiarity with the portfolio. Blasdell and Spence will continue to benefit from the research of the firm’s stellar core analyst team, which has powered strong results across a variety of US large-cap strategies.

Blasdell’s arrival offers some assurances but raises other questions. Blasdell’s large-cap fund is aggressive, fast-pivoting, and can buy cheap stocks roiled in controversy. But this strategy has historically gravitated toward higher-quality companies with valuation as a secondary consideration, traded infrequently, and kept a long-time horizon. Blasdell says this strategy will remain mostly the same and that he will adapt his style to fit his new environment. He admits that annual portfolio turnover may increase from its typical 20% mark but that it should be below the roughly 150% norm of his large-cap fund. He’s also pledged to assess his typical universe through a quality filter, focusing on companies that he’s comfortable owning for a long time through the market cycle. This strategy’s inclusion of small caps presents another angle, as Blasdell lacks extensive experience in that segment. He can lean on Spence’s experience and knowledge, as well as the small-mid analyst team as he gets up to speed.

Overall, it is difficult to embrace the investment process at this stage, but with a bevy of good resources, the team has a shot to succeed.

Soon-to-retire Jonathan Simon anchored this portfolio in financially strong companies built for the long term but included some leeway for turnaround plays and other one-offs. The firm says that will remain the focus despite incoming manager Scott Blasdell’s more aggressive leanings, but it’s hard to say at this stage. Blasdell’s work on JPMorgan Large Cap Value highlights an aggressive style that produced higher volatility than the benchmark. Market turmoil piques his interest and he invests at times when others may be fleeing. He says he’ll moderate that tendency to match this strategy’s historical character, focusing on companies with strong franchise values that are good candidates to buy and hold. Turnover under Simon tends to range between 15% and 30%, but that figures to increase somewhat under Blasdell.

Blasdell has significant experience with large and mid-caps from his other charges, but less in small caps. Given the strategy’s roughly $20 billion asset base and tendency to hover around the market-cap allocation of its Russell 3000 benchmark, they don’t figure to feature prominently.

Comanager Graham Spence and the small-mid analyst team are very familiar with this strategy’s style and surely will help shape it, but the inherent clash of styles makes it difficult to embrace.

This portfolio figures to change under incoming lead manager Scott Blasdell. For instance, Jonathan Simon kept certain sector bets for many years. The portfolio held a greater proportion of assets in financials than the benchmark for virtually its entire history. The opposite could be said for the technology and healthcare sectors. Blasdell is more agnostic when it comes to his allocation decisions, going where he sees the best value and upside. Investors shouldn’t be surprised to see changes once he starts calling the shots in July 2024.

Other elements may remain the same. Blasdell says he is committed to keeping a quality bias in the portfolio. Such a focus wasn’t always evident under Simon, but most of the portfolio’s longest-held and largest positions are in companies with established businesses and enduring competitive advantages, such as Berkshire Hathaway BRK.B and Bank of America BAC.

Investors don’t need to be concerned about style drift. Blasdell is a true value investor and figures to keep the portfolio within the value portion of the Morningstar Style Box. Large- and mid-cap stocks should remain the focus, too, given Blasdell’s familiarity with that segment and a relatively large asset base to put to work.

Jonathan Simon may be retiring after piloting this strategy for nearly 20 years, but a capable investor will be taking his place. Scott Blasdell will assume lead manager duties in July 2024 and brings a wealth of experience and a strong track record on a related offering. He has 30 years of industry experience and 25 at J.P. Morgan. Before achieving strong results on JPMorgan Large Cap Value beginning in 2013, he managed institutional separate accounts and a REIT strategy.

Comanager Graham Spence will continue to play an important role here. Initially hired to assist Simon, Spence will continue to support lead manager Blasdell and work with the small/mid analyst team, as well as with Blasdell’s incoming team of dedicated large-cap analysts. His knowledge and experience with the current portfolio remain key assets.

The managers will continue to benefit from the research of the firm’s stellar core analyst team, which typically boasts a roster of at least 20 experienced professionals. That group has helped power strong results across the firm’s US large-cap equity franchise.

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.

From the institutional shares’ 2005 inception through March 2024, the fund outpaced the Russell 1000 Value Index category benchmark by 1.6 percentage points annualized and bested the Russell 3000 Value Index prospectus benchmark by a touch more. These results came with slightly more volatility at times, but risk-adjusted returns still look good.

The fund has tended to do well when the value factor was in favor, such as in 2022 and 2016. Conversely, it hasn’t done as well in growth-led markets such as 2017, 2020, and 2023.

Given Simon’s tendency to maintain perpetual over- or underweightings to certain sectors, the fund’s positioning has helped or hurt at times, but stock selection has been an enduring positive.

Scott Blasdell, who will assume the lead manager role from Simon, brings a strong record from managing JPMorgan Large Cap Value since April 2013. The institutional share class outgained the average large-value Morningstar Category peer by 2.1 percentage points annualized and the Russell 1000 Value Index by 1.8 points.

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we don’t think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Neutral.