JPMorgan Small Cap Blend I JDSCX

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

The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy's investment approach stands out and earns an Above Average Process Pillar rating. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. 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 Blend Fund earns an Above Average Process Pillar rating.

The predominant contributor to the rating is the fund's excellent long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 56% also supports the rating. 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. Their compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. 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 has tended to hold more growth stocks than others in the Small Blend Morningstar Category. But in terms of size exposure, it is similar to the average. Examining additional factor exposure, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also demonstrated a bias towards lower-momentum stocks over its peers over the past years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This is a higher-risk, higher-reward approach. 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 by 4.1 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and industrials; however, the allocations are similar to the category. The portfolio is composed of 243 holdings and is less top-heavy than peers. Specifically, 11.4% of the portfolio's assets are concentrated within the top 10 fund holdings, as opposed to the typical peer's 24.4%. And finally, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

Eytan M. Shapiro, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.3 stars, reflecting below-average risk-adjusted performance versus category peers. Eytan M. Shapiro has an experienced listed co-manager. Together, they average over 30 years of listed portfolio management experience. At least one member of the team has invested$ 1 million or more of their own capital in the fund, which helps align their interests with the strategy's investors.

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.

The share class outstripped the category index, Russell 2000 Index, with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. Notably, these strong risk-adjusted results have not come with more volatility for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Despite the mixed risk-adjusted performance, the strategy had higher absolute returns. On a 10-year basis, this share class beat the category index on an annualized basis by 2.9 percentage points. It has also come out ahead of peers by an annualized 2.1 percentage points, over the same 10-year period.

Thus, assessing cost is a critical step in any investment evaluation. This share class is in the middle quintile of its Morningstar Category. Its reasonable fee, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class has the ability to deliver positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Silver.