JPMorgan Short Duration Bond A OGLVX

The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.

The strategy's managers invest alongside shareholders, which helps it earn 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 underweight position in corporate bonds and debt with over 30-year maturities compared with category peers. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Short Duration Bond Fund earns an Above Average Process Pillar rating.

The predominant contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 56%. 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. Noteworthy 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 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 Short-Term Bond 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 category average, the managers have been underweight corporate bonds in recent years. In the latest month, the strategy has also relatively underweighted corporate bonds compared with Morningstar Category peers. Additionally, there's been a bias away from debt with longer than 30-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with longer than 30-year maturities than peers. Finally, during the past few years, the fund leaned meaningfully away from BBB rated bonds. In recent months, the strategy also had less exposure to BBB rated bonds compared to its peers.

This strategy has a modest 3.0% 12-month yield, lower than its average peers' 3.8%. Plus, its 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return) sits at 3.8%. 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 A.

The main contributor to the rating is its parent firm's five-year success ratio of 56%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The stability of talent across its parent firm also supports the team. The firm's asset-weighted manager tenure of 20 years demonstrates its ability to retain portfolio managers. Lastly, the rating is limited by the instability of its management team. The fund last saw a manager change five years ago, which suggests that it could do more to retain its portfolio managers.

Toby Maczka brings six years of listed portfolio management experience to the team. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, indicating that their risk-adjusted returns have been in line with the category average. Toby Maczka has an experienced listed co-manager. Together, they average 21 years of listed portfolio management experience. 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.

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 subpar returns compared with peers, but similar returns compared with the category benchmark. Specifically, this share class trailed its average peer by 24 basis points annualized over a 10-year period. But it mirrored the category index, Bloomberg Barclays U.S. Aggregate Government/ Credit 1-3 Year Index over an eight-year and 10-year period.

When risk is properly accounted for, the strategy is not any more compelling. The share class trailed 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.

It is good practice to weigh them heavily in any investment evaluation. This share class sits in the middle quintile of its Morningstar Category. Its reasonable fee, taken together with the fund’s People, Process, and Parent Pillars, suggests that this share class is unlikely to deliver positive alpha versus its category benchmark, explaining its Morningstar Medalist Rating of Neutral.