JPMorgan Small Cap Value Fund earns a High Process Pillar rating.
The most significant 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. The parent firm's impressive risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also bolsters the process. Strong risk-adjusted performance also supports the rating, as shown by 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.
This strategy hews closely to the market cap and investment style of its Small Value category peers. Analyzing additional factors, this strategy has exhibited a tilt toward high-volatility stocks or the shares of companies with histories of the higher standard deviation of returns, compared with Morningstar Category peers in the last few years. Such exposure tends to pay off when markets are hot and to be costly when they are not. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy has exhibited a tilt toward liquid assets, evidenced by consistently holding companies with relatively higher trading volumes. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In this month, the strategy also had more exposure to the Liquidity factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.
The portfolio is overweight in real estate and healthcare relative to the category average by 4.8 and 4.5 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and consumer cyclical, underweight the average by 5.0 and 3.1 percentage points of assets, respectively. The portfolio is composed of 377 holdings and is diversified among those holdings. In its most recent portfolio, 9.0% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 28.9% average. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.