Skip to Content
Fund Spy

A Top-Rated Target-Date Series With Tactical Acumen

Although a manager change looms large, JPMorgan SmartRetirement Blend has responsibly planned for succession.

Mentioned:
The following is our latest Fund Analyst Report for JPMorgan SmartRetirement Blend 2025 R6 (JBYSX). Morningstar Premium Members have access to full analyst reports such as this for more than 1,000 of the largest and best mutual funds. Not a Premium Member? Gain full access to our analyst reports and advanced tools immediately when you try Morningstar Premium free for 14 days.

An impending manager retirement results in a downgrade to some share classes of the JPMorgan SmartRetirement Blend target-date series. This series is less costly than its active sibling, so the cheapest R6 share class keeps its Morningstar Analyst Rating of Gold, but the ratings of pricier share classes range from Silver to Neutral depending on their fee disadvantage.

On March 3, 2020, JPMorgan announced that Anne Lester would step down as a portfolio manager from the series on May 1 in anticipation of a July 31 retirement to focus on national retirement policy. Lester’s unexpected departure represents a loss: She had overseen this series as lead manager since its inception in 2006 and pioneered innovative retirement plan participant research that meaningfully enhanced the series and raised the bar for target-date managers in general. Her departure results in a downgrade of the series’ People Pillar to Above Average from High.

Still, JPMorgan has a deep multi-asset research team and responsibly planned for succession. Lester handed off her day-to-day duties in 2019 to her comanager of 10 years, Dan Oldroyd. Oldroyd is a great investor in his own right and has been a manager on this target-date series since inception. But his responsibilities have changed significantly in recent years, taking over the series’ tactical tilts and manager selection in 2019. Now Oldroyd will take on Lester’s participant research duties, too, and must coordinate the vast multi-asset resources that support the series without her.

A robust, team-based investing process remains intact. Oldroyd and team use a thoughtful asset-allocation approach, revisiting strategic weightings annually in light of potential changes to inputs such as participant-behavior research. The team also seeks to add value through an established tactical-allocation process and carefully populates the series with complementary underlying managers. With about $125 billion across the firm’s target-date strategies, the series isn’t as nimble as it once was, but we remain confident in the team's tactical acumen.

Process | High 
A consistently thoughtful approach to asset allocation and manager selection sets the series apart among target-date managers, justifying a renewed Process rating of High. Lead manager Dan Oldroyd must prove that he can build on Anne Lester’s legacy of innovative retirement research, but there’s good reason to believe he can follow in her footsteps.

JPMorgan designed the SmartRetirement Blend funds' glide path based on behavioral research, finding that retirement plan participants' salaries are less stable than many models assume, and they engage in counterproductive practices. The team aims to maximize the number of participants who can achieve a sufficient level of their pre-retirement income throughout retirement.

JPMorgan regularly tweaks its series in light of potential changes to factors like investor behavior or capital market assumptions. The team made more changes than normal in 2019 to reflect its forward-thinking view on the markets. That February, the team made its most significant glide-path change since 2007 by steepening it overall, increasing the allocation to stocks by up to 5 percentage points for young investors and decreasing it by 3.5 percentage points near and in retirement. Later in the year, the team had its biggest lineup reshuffle, firing four underlying strategies and hiring five.

JPMorgan believes in diversification, and the target-date team usually moves ahead of consensus. In 2018, it upped foreign equity to 40% of assets before most peers. In 2019, the team lowered the strategic allocation to stocks for retirees while an equity rally was underway. The series now underweights stocks versus peers starting at age 55, diversifying into areas like emerging-markets debt and high yield. Allocations also reflect shorter-term tactical bets, though these moves are limited to about 3 percentage points across the glide path while the active series has about twice as much leeway in longer-dated vintages. Now, the team implements tactical shifts more gradually owing to significant asset growth, but we believe the move will still add value.

This series mixes active and passive exposure to keep costs in check, using third-party and JPMorgan passive strategies in areas where it believes less opportunity for outperformance exists, including U.S. and foreign developed stocks. Overall, passive exposure constitutes more than 60% of this series’ assets. The team won’t hesitate to fire an in-house manager; it fired three in 2019 alone. To choose underlying strategies, Dan Oldroyd and team screen this universe for factors such as expected alpha, correlation, and fees. Morningstar Medalists account for nearly 75% of assets across vintages.

People | Above Average 
In March of 2020, JPMorgan announced that Anne Lester will step down from the SmartRetirement Blend portfolio management roster in anticipation of a July 31, 2020, retirement. She relinquished day-to-day responsibilities on the series in early 2019, but Lester influenced the strategic direction of JPMorgan’s target-date series, so her sudden departure is a big loss.

Lester’s longtime comanager and 20-year JPMorgan veteran Dan Oldroyd will take over as the series’ leader. Oldroyd’s long history with Lester and the series inspires confidence. However, his research and portfolio implementation responsibilities have increased meaningfully in the wake of Lester’s departure and a portfolio manager shakeup in 2019. Plus, at its current size, the series requires a closer eye than it once did. Encouragingly, Oldroyd cut his client-facing responsibilities to make way for his added duties. We’re confident in Oldroyd, but as he builds a track record under the new setup, the People rating has fallen to Above Average.

The series’ portfolio management roster had been in flux prior to Lester’s departure. In February 2019, Mike Schoenhaut and Eric Bernbaum stepped down, handing off manager selection and tactical position sizing to Oldroyd. To aid Oldroyd, Silvia Trillo, former head of the multi-asset team's manager research group, joined the team.

Parent | Above Average 
J.P. Morgan Asset Management boasts long-tenured and strongly aligned portfolio managers who are supported by deep analytical resources. Competitive fees across the board also contribute to the firm’s Positive Parent rating.

The firm's diverse lineup features many Morningstar Medalists across asset classes and regions. In February 2018, its U.S.-domiciled SmartRetirement target-date series was upgraded to a Morningstar Analyst Rating of Gold, befitting strong underlying resources and processes on both equity and fixed income. On U.S. equities, for instance, experienced managers draw on a core team of more than 20 career analysts, while on their cored fixed-income mandates, long-tenured managers are supported by more than 25 credit and securitized analysts based across Columbus, London, and New York. Managers' compensation factors in 10-year performance where applicable, which exceeds industry standards. Retention rates and managers' coinvestments alongside fund shareholders are above average, and succession planning is generally well handled.

Fees are regularly reviewed downward; funds tend to be cheaper relative to peers in the U.S. than abroad. The firm has refrained from trendy offerings and expanded its passive business recently. It has continued to rationalize its broad lineup otherwise, leading to some mergers and liquidations in Europe in particular.

Performance 
Long-term results have delivered despite recently mixed performance caused by mistimed opportunistic bets. Over the five-year period and since the series' July 2012 inception, more than half of the vintages beat their respective S&P target-date indexes, and all but one rank in the top half of their peer group through February 2020. Performance on a risk-adjusted basis over those same periods ranks in the top third and matches or beats the same benchmarks across all vintages except the Income fund. The series has proved it can outperform in both up and down markets. Since 2013, on average the funds only lagged the category average in two calendar years.

The series has struggled recently as its tactical bets have failed to add value for two consecutive calendar years. In 2019, the series took risk off the table even as the stock market rallied, socking away assets in short-duration bonds and underweighting stocks. But that same position has boosted performance for the year to date through February 2020, helping the series withstand the early innings of a global sell-off on coronavirus fears. On the whole, attribution from JPMorgan shows tactical decisions have contributed to strong results over the past decade. The firm’s tactical process predates the target-date series by about 12 years and has added value in 15 of the past 20 calendar years.

Price 
It’s critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar Category’s cheapest quintile. Based on our assessment of the fund’s People, Process, and Parent pillars in the context of these fees, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Gold.

To view this article, become a Morningstar Basic member.

Register for Free

Madeline Hume does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.