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JPMorgan Large Cap Growth I SEEGX

Analyst rating as of
NAV / 1-Day Return
49.38  /  0.02 %
Total Assets
38.3 Bil
Adj. Expense Ratio
0.690%
Expense Ratio
0.690%
Fee Level
Average
Longest Manager Tenure
18.33 years
Category
Large Growth
Investment Style
Large Growth
Min. Initial Investment
1,000,000
Status
Open
TTM Yield
0.00%
Turnover
50%
unlocked

Morningstar’s Fund Analysis SEEGX

Analyst rating as of .

Analyst Promoted to Management Team at JPMorgan Large Cap Growth; Ratings Unchanged

Our analysts assign Bronze ratings to strategies they’re confident will outperform a relevant index, or most peers, over a market cycle.

Analyst Promoted to Management Team at JPMorgan Large Cap Growth; Ratings Unchanged

Associate Director

Analyst Note

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On Nov. 1, 2022, J.P. Morgan promoted longtime analyst Rob Maloney to comanager on JPMorgan Large Cap Growth in recognition of his contributions to the strategy. This does not affect either the strategy’s Above Average People Pillar rating or its Morningstar Analyst Rating.

Maloney, who came to J.P. Morgan in 2013, brings over 20 years of industry experience and will continue covering the energy and industrials sectors for this strategy as he has done since 2013. While allocations to these sectors are limited on this growth-oriented strategy (typically accounting for about 10% of assets), this move does not come as a surprise and signals the team’s confidence in Maloney’s ability to add value. The team’s four existing comanagers, including lead Giri Devulapally, retain their roles and responsibilities.

Summary

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An impressive lead manager earns JPMorgan Large Cap Growth a Morningstar Analyst Rating of Bronze across most share classes, with pricier ones at Neutral.

Giri Devulapally leads the charge here and is impressive. He boasts one of the longer tenures in the large-growth Morningstar Category, joining as comanager here in 2004 before taking over shortly thereafter in 2005, and has proved a savvy investor. He is supported by a team of five, including comanagers Holly Fleiss, Larry Lee, and Joe Wilson, who collectively average more than 20 years’ industry experience and were promoted to their roles in late 2020. This helps to address key-person risk, as Devulapally had managed the sizable fund alone since 2014, but he’s still firmly in charge. Comanager Fleiss took a brief leave of absence in late 2021; she returned by January 2022, and her healthcare duties were split by the sector-focused team.

While the group’s approach is sensible, it doesn’t necessarily stand out in a very competitive and highly efficient peer group. Devulapally and crew seek out stocks with large addressable markets undergoing change and firms with competitive advantages, solid long-term growth prospects, and margin expansion opportunities. Additionally, they favor names with positive price momentum, a signal that the market hasn’t recognized a stock’s potential. Spotting these trends isn’t easy in a competitive space, and courting this type of risk can lead to challenging performance in market drawdowns. Still, the portfolio stands out. Devulapally lightened the portfolio’s technology exposure in 2021, building more sizable positions in financials stocks like Blackstone BX and Charles Schwab SCHW given positive price momentum. He’s also looked to less flashy names like John Deere DE, given its technological advancements, but the portfolio’s top holdings remain index stalwarts like Apple AAPL and Microsoft MSFT.

Over Devulapally’s tenure, this fund has been a winner. Dating to his start as solo manager, the fund places in the peer group’s top decile and edges the Russell 1000 Growth Index. Still, the strategy has been more volatile than its benchmark and peer group, so to succeed here, investors here must exhibit Devulapally’s patience to stomach the ride.

Process

| Average |

Lead manager Giri Devulapally’s approach is solid but does not stand out in a competitive peer group. The strategy maintains its Average Process rating.

Devulapally and his team aim to invest in big winners while avoiding firms at risk of notable underperformance. He finds these opportunities in competitively positioned companies with long-term growth and margin expansion opportunities, as well as companies with large addressable markets undergoing change. He favors names with positive price momentum, a signal that the market has recognized the name’s potential. These names often come at a price, though. The portfolio has been more volatile than its Russell 1000 Growth Index benchmark and had a bit more exposure to the index’s losses.

Devulapally believes the biggest winners are often expensive. That’s not to say he isn’t valuation-aware, though. He closely monitors each name’s relative price tag and will trim the holding if its runup seems unprecedented in contrast to historical valuations. He pared back his stakes in Telsa TSLA and Nvidia NVDA in early 2021, as well as presciently trimming Meta Platforms FB later in the year before its early-2022 plummet. Despite the emphasis on momentum, the strategy’s low turnover is a plus. Over the past five years through 2020, its portfolio returned 31% annually on average, lower than most peers, though it has been on the rise over the past few years, clocking in near 60% in 2021.

People

| Above Average |

A talented manager and a seasoned supporting cast earn this strategy an Above Average People rating.

Lead manager Giri Devulapally has proved to be a capable investor. Devulapally, who joined JPMorgan Asset Management in 2003 after a six-year stint as a technology analyst at T. Rowe Price, became comanager of this strategy in August 2004 and the sole lead manager in August 2005. Since then through January 2022, Devulapally has impressed, delivering solid absolute and risk-adjusted returns. His efforts are focused, as this is the only strategy he manages.

Three of the strategy’s five analysts became comanagers in November 2020. Holly Fleiss (who took a brief sabbatical in late 2021 but has since returned), Larry Lee, and Joe Wilson--who collectively average more than 20 years of industry experience--cover healthcare, financials, and technology names, respectively. While they have maintained their sector responsibilities in their new roles, their promotions begin to address key-person risk related to Devulapally, who had managed the sizable fund alone since early 2014, though he’s still firmly in charge. Two additional sector analysts support the approach. The group has seen little turnover over the years, with the only recent loss being a consumer analyst in 2018, but strong picks in the consumer sectors since the departure indicate Devulapally found a talented replacement. The group can also leverage JPMorgan’s 200-plus global equity analysts for ideas and insights.

Parent

| Above Average |

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of 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.

Price

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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 second-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 Bronze.

Performance

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In the efficient, highly competitive large-growth category, lead manager Giri Devulapally has impressed. Since he became this strategy's sole lead manager in August 2005 through January 2022, the Institutional shares gained 13.4% annualized, outpacing the Russell 1000 Growth Index benchmark’s 12.6% gain and 95% of large-growth category peers.

The strategy has had its fair share of volatility, though. Over Devulapally’s tenure as lead manager, the strategy’s returns had a standard deviation of 16.9 versus its benchmark’s 15.6. The strategy’s exposure to market drawdowns is similar to the bogy’s, evidenced by its 102% downside-capture ratio. Devulapally’s 103% exposure to up markets mitigated his tendency to lose just a bit more during market drawdowns. His risk-adjusted returns fared well relative to peers, but the record was more even relative to the index.

Devulapally has posted a strong record over the past 10 years, including top-decile showings in three of four years from 2017 through 2020. Impressively, the strategy roared back following 2020’s first-quarter market drawdown, with the Institutional shares gaining a whopping 100.6% versus the benchmark’s 81.5%, thanks to strong stock picks in names like Tesla TSLA. It fell behind the benchmark in 2021, with underperformance in names like Zillow ZG and underweightings in market darlings like Alphabet GOOG and Microsoft MSFT.

Portfolio

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Lead manager Giri Devulapally builds a portfolio that looks different from the Russell 1000 Growth Index. Like its bogy, this fund has a healthy dose of technology, or tech-related stocks like Alphabet GOOG, which as a 7.5 percent position was a sizeable overweighting relative to the index as of December 2021. However, Devulapally and crew invested less in tech stocks than their benchmark and peer group over the past few years, with relative underweightings in stalwarts like Apple AAPL and Microsoft MSFT, and less in software businesses. The portfolio’s tech underweighting has narrowed as the team have added to names like Microsoft and bought application software provider Intuit INTU, but certain late-2021 trims of stocks like PayPal PYPL and Snap SNAP were prescient given their near-term declines.

Devulapally has latitude with the portfolio’s sector allocations, which are determined through bottom-up stock selection. He’s found several opportunities within financials as of late, with an 8.8-percentage-point stake as of year-end 2021 that topped the bogy’s 2.2%. This was largely driven by nonbenchmark holdings such as Charles Schwab SCHW and SVB Financial Group SIVB, which the team added to or bought in early 2021 given their positive price momentum. Devulapally and team also occasionally buy IPOs, like electric vehicle automaker Rivian Automotive RIVN and crypto exchange platform Coinbase Global COIN (which they have since sold), though given inherent risks and volatility here, they tend to hold them as small positions in the portfolio.