JPMorgan Small Cap Growth A PGSGX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest quintile among peers.

The strategy's managers invest alongside shareholders, which helps it earn an Above Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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 Small Cap Growth Fund earns an Above Average Process Pillar rating.

The main driver of 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 outperformed 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 contributes to the process. 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.

This strategy is similar to its Small Growth category peers in terms of market-cap and style exposure. Analyzing additional factors, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to experience a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility 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 technology and consumer cyclical relative to the category average by 4.6 and 3.1 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and industrials, with financial services underweighting the average portfolio by 5.5 percentage points of assets and industrials similar to the average. The portfolio is positioned across 134 holdings and its assets are more dispersed than peers in the category. In particular, 17.6% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the typical peer's 26.3%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 33% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Eytan M. Shapiro, 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 2.3 stars, demonstrating underwhelming risk-adjusted performance. Eytan M. Shapiro is supported by an experienced team, being able to draw on three additional listed managers, who average 19 years of listed portfolio management experience. As a team, they manage two investment vehicles together, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. With at least one manager investing$ 1 million or more in this offering, investors can have some assurance that the team's interests are aligned with theirs.

Note: The People Pillar rating is indirectly assigned by an analyst. At least one of the managers on this fund manages a different product rated by an analyst. The analyst-assigned People Pillar rating(s) for these managers are combined with algorithmic scores for any non-covered 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.

It has been challenged over the short term but strong over the long term. Over the past five years, the fund matched the category index, the Russell 2000 Growth Index, and lagged the category average by 1.0 percentage point. More importantly, on a 10-year basis, this share class led the index by an annualized 1.6 percentage points.

The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. Often, higher returns are associated with higher risk. This strategy is no exception, with a standard deviation of 22.4% exceeding the benchmark's 20.8%.

This share class imposes a fee that places it in its Morningstar Category's second-costliest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars indicate this share class can produce positive alpha relative to its category benchmark, resulting in a Morningstar Medalist Rating of Silver.