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JPMorgan Equity Index I HLEIX

Analyst rating as of

Morningstar’s Analysis

Analyst rating as of .

A solid option for U.S. large-cap exposure.

Our analysts assign Silver ratings to strategies that they have high conviction will outperform a relevant index, or most peers, over a market cycle.

A solid option for U.S. large-cap exposure.

Associate Analyst


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JPMorgan Equity Index provides a broadly diversified and low-turnover portfolio that is representative of U.S. large-cap stocks. Its competitive expense ratio gives it a durable performance edge over category peers. Under our new ratings framework, the R6 share class warrants a Morningstar Analyst Rating upgrade to Gold from Silver due to its lower fee; the more expensive share classes maintain Silver and Bronze ratings.

The S&P 500 index is a market-cap-weighted index that harnesses the market’s collective wisdom to efficiently capture the opportunity set in the U.S. large-cap space. S&P’s index eligibility criteria require index constituents to be profitable and highly liquid. While most large-cap names are financially viable, the requirement ensures that occasional exceptions are kept out of the index, improving the portfolio risk profile. An index committee selects the index constituents, which represent approximately 80% of the total market capitalization of the U.S. equity market. While the committee-based approach lacks transparency, it provides more flexibility around reconstitution and can reduce unnecessary index changes. This mitigates transaction costs as compared with more rigidly rules-based indexes.

The large-cap space enjoys a high level of liquidity and visibility, allowing new information to be quickly incorporated into prices. Market-cap weighting leverages this collective wisdom to determine position sizes in an efficient manner. This approach promotes broad diversification and creates a portfolio that is representative of the large-blend Morningstar Category.

Market-cap weighting can expose the index to significant stock- or sector-level concentration during the market’s intermittent manic episodes. This can tilt the portfolio toward richly valued names or sectors, such as was the case at the height of the tech bubble. Still, in the long run, the benefits of broad diversification, low turnover, and a low fee outweigh these drawbacks.

Its previous tax-efficiency issue was addressed by the launch of the R6 share class in 2016, which brought in net inflows and substantially lowered its capital gains distributions.


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The fund employs full replication to track the S&P 500, which is broadly diversified and representative of its category. Market-cap weighting allows it to utilize the market's collective wisdom to size its positions, and it enjoys low turnover as a result. It earns a High Process Pillar rating.

The S&P 500 index is composed of 500 of the largest U.S. stocks in the investable market that pass S&P’s market-cap, liquidity, and profitability screens. The profitability requirement introduces a slight quality tilt to the portfolio. However, as most large-cap stocks are profitable, this requirement does not have a material impact on the portfolio’s performance. An index committee then selects the constituents from this eligible universe, allowing more flexibility around index additions and deletions compared with rigidly rules-based peers. Existing constituents will only be deleted in the event they continually and substantially violate the addition criteria, as the index committee allows temporary deviations. For instance, H&R Block HRB was not replaced until September 2020 when additions necessitated its deletion, even though its market capitalization has fallen below the eligibility criteria for the past few years.

The portfolio managers reinvest dividends as they are paid and use derivatives to equitize cash to keep pace with the benchmark. They have historically used securities lending to generate additional income and offset expenses for the fund.


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The JPMorgan Market Cap Equity team is well-capable of fulfilling index-tracking duty, but its approach does not stand out from other index management teams, earning an Average rating.

Michael Loeffler, Nicholas D’Eramo, Oliver Furby, and Alex Hamilton are the named managers on this strategy. Loeffler has been in the industry since 1997 and with JPMorgan since 1999. D’Eramo has been with the firm since 2000 and came onboard the strategy in 2014 to prepare for Bala Iyer’s retirement; Iyer had managed the fund since 1995. Furby and Hamilton joined JPMorgan as portfolio managers in 2014 and 2017, respectively.

The experienced managers have a dedicated team of professional traders and analysts helping with daily portfolio activities. Much of the workflow is automated using JPMorgan in-house platform Spectrum, allowing managers to focus on index tracking. The team has multiple layers of risk management, assisted by dedicated technology. Index-tracking performance is considered in determining manager compensation, aligning them with investors’ interests.


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J.P. Morgan Asset Management’s strong investment culture, which shows through its long-tenured, well-aligned portfolio managers and deep analytical resources, supports a renewed Above Average Parent rating.

Across asset classes and regions, the firm's diverse lineup features many Morningstar Medalists, such as its highly regarded U.S. equity income strategy that’s available globally. There's been some turnover in the multi-asset team recently, but it remains deeply resourced and experienced. Manager retention and tenure rates, and degree of alignment for U.S. mutual funds compare favorably among the competition. Managers' compensation emphasizes fund ownership over stock ownership, which is distinctive for a public company.

The firm continues to streamline its lineup and integrate its resources further. For instance, in late 2019, the multi-asset solutions division combined with the passive capabilities. The firm hasn’t launched trendy offerings as it’s mostly expanded its passive business lately, but acquisition-related redundancies and more hazardous launches in the past weigh on its success ratio, which measures the percentage of funds that have both survived and outperformed peers. Fees are regularly reviewed downward globally; they're relatively cheaper in the U.S. than abroad. Also, the firm is building its ESG capabilities and supports distinctive initiatives on diversity.


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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 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 Silver.


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The fund’s I share class has outperformed the category average by 1.24 percentage points annualized since its inception in 1991. Both its total and risk-adjusted performance ranked in the top half of the large-blend Morningstar Category over the trailing three-, five-, 10-, and 15-year periods ended January 2021. Most of this outperformance can be attributed to its low cash drag and competitive expense ratio. The portfolio tends to hold up as well as its category peers during downturns while capturing more of the upside. During the early 2020 coronavirus shock, the fund recovered faster than the category average after experiencing a similar drawdown.

Over the trailing one-, three-, five-, and 10-year periods ended January 2021, each share class of the fund trailed the S&P 500 index by an amount approximating its annual expense ratio.

Because the strategy is structured as an open-end fund, the managers must liquidate positions to raise cash for redemptions, passing capital gains to investors in the process. While this fund has distributed noticeable capital gains in the past because of outflows, its new R6 share class has generated net inflows since 2017. This fund has been tax-efficient in the past few years, with zero capital gains distributions in 2020.


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Market-cap weighting allows the fund to harness the market's collective view about the relative value of each stock and keeps turnover among the lowest in the category. By definition, this tilts the portfolio toward larger companies with entrenched positions. Stocks representing nearly 90% of the portfolio enjoy either a narrow or wide Morningstar Economic Moat Rating.

This weighting scheme pushes the work of sizing positions onto the market. Over the long term, this has been a winning proposition. But the market has manic episodes from time to time. Over shorter time frames, market-cap weighting means that investors’ enthusiasm for a particular stock or sector can make the portfolio top-heavy as it tilts toward recent winners. This has been the case with technology stocks in recent years. The portfolio’s top 10 holdings represented approximately 28% of its assets as of January 2021, higher than its historical average level but still much lower than the category average.

Nonetheless, the fund is still representative of the opportunity set available to peers in the U.S. large-cap space, and its sector and style composition are similar to the category average. As of December 2020, the fund was overweight technology stocks by 3.12% and underweight industrials by 1.62% as compared with the category average.