JPMorgan Mid Cap Value benefits from an accomplished management team and sound investment process but falls short of best-in-class peers given its relatively unproven analyst roster and some recent stock-picking missteps. Accordingly, share classes with a Morningstar Analyst Rating of Gold drop to Silver or Bronze depending on their fee levels, while the lone Silver share class drops to Bronze.
This is a proven strategy, but it hasn’t replicated its early success. It focuses on stocks with cheaper valuations than the broad market and overlays an emphasis on profitability and business quality, which have historically led to lower performance volatility than the Russell Midcap Value Index. Jonathan Simon leveraged this approach admirably during his stint as sole manager from the strategy’s 1997 inception through the end of 2004, putting up very strong results up to and through the dot-com crash. Larry Playford joined Simon as comanager to begin 2005, followed by Gloria Fu in 2006. Each served as the lead decision-maker on certain sectors, though portfolio construction was a group exercise. The trio performed well through 2015 while utilizing a mixed cast of mostly shared analyst resources. Efforts to bolster the analyst team picked up following the departure of the strategy’s lone dedicated analyst in 2015, but more changes followed. The strategy’s performance slid in subsequent years as some of Fu’s consumer picks faltered, ultimately culminating in her departure from the firm in 2019. JPMorgan hired new analysts to replace Fu and enhance coverage in other sectors, which now fall under the purview of either Simon or Playford.
The reconfigured team hasn’t distinguished itself in a limited sample. The typically defensive strategy didn’t provide much protection during late 2018’s pullback or 2020’s first-quarter bear market. The portfolio’s characteristics were broadly consistent, but it suffered from a handful of poor-performing stocks in the consumer, energy, and technology sectors. It also leaned more heavily into sectors such as financials, which suffered most heavily during the pullbacks. To the managers’ credit, they largely maintained their positioning into 2021 and have made up ground, posting a 20.2% year-to-date return through September, which ranked in the second quartile of mid-value Morningstar Category peers and beat the benchmark by about 2 percentage points.
Despite reduced confidence in its prospects, this strategy should still deliver over the long run.