JPMorgan Corporate Bond R6 CBFVX Fund Analysis

A strong management team and sound investment process underpin JPMorgan Corporate Bond R6's Morningstar Quantitative Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.

The strategy's managers invest alongside shareholders, which helps it earn an Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. The portfolio has overweighted corporate bonds and has an underweight in BB rated bonds compared with category peers. The strategy has a solid parent that earns an Above Average Parent Pillar rating. This firm has had a favorable lineup success ratio and overall affordable fees.

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. JPMorgan Corporate Bond Fund earns an Above Average Process Pillar rating.

Compared with other funds in the Corporate Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity. Opening the analysis to additional factors, the portfolio has displayed three biases over time, whether towards or away from certain fixed-income instruments. First, the managers have shown an overweight position on corporate debt. Additionally, there's been an underallocation from BB rated bonds. And finally, the fund leans toward debt with three- to five-year maturities.

This strategy has a 3.6% 12-month yield, higher than its average peer's 3.3%. In addition, it has a 5.1% 30-day SEC yield (a measure similar to yield-to-maturity). Higher yields tend to indicate higher credit risk. Yet that's not the case here. The portfolio's average surveyed credit quality is on par with peers, both the fund and the average being rated BBB.

JPMorgan Corporate Bond Fund's personal investments from managers and seasoned portfolio managers support its Above Average People Pillar rating. The team is backed by Lisa Coleman, the longest-tenured manager on the strategy, who provides over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, demonstrating average risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 17 years of portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between $500,000 and $1 million. An investment of more than $1 million would be ideal to align managers' interests with those of the fund's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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 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.

This strategy’s Retirement share class has held up nicely, holding even with its peers and outlasting the category benchmark. Over a nine-year period, this share class' 2.5% gain mirrored the category's average return. And it exceeded the return of the category benchmark, the Bloomberg Barclays U.S. Corporate Bond Index, by an annualized 35 basis points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class led the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing five-year period. Often, higher returns are associated with more risk. However, this strategy hewed close to the benchmark's standard deviation. Finally, the share class proved itself effective by generating positive alpha, over the same five-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Returns vary from period to period, but expenses are always deducted. It is good practice to weigh them heavily in any investment evaluation. This share class is within the second-cheapest quintile of its Morningstar Category. Its low expense ratio, taken together with the fund’s People, Process, and Parent Pillars, results in a judgment that this share class has the ability to deliver positive alpha relative to its category benchmark, explaining its Morningstar Quantitative Rating of Bronze.