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JPMorgan Core Bond R5 JCBRX

Analyst rating as of
NAV / 1-Day Return
10.10  /  0.30 %
Total Assets
31.8 Bil
Adj. Expense Ratio
0.440%
Expense Ratio
0.440%
Fee Level
Average
Longest Manager Tenure
7.21 years
Category
Intermediate Core Bond
Credit Quality / Interest Rate Sensitivity
High / Moderate
Min. Initial Investment
0
Status
Open
TTM Yield
2.64%
Effective Duration
5.87 years
unlocked

Morningstar’s Fund Analysis JCBRX

Analyst rating as of .

A consistent, all-weather core bond offering.

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

A consistent, all-weather core bond offering.

Senior Analyst

Summary

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JPMorgan Core Bond boasts seasoned portfolio managers, the vast resources of JPMorgan’s fixed income franchise, and a time-tested process, earning a Morningstar Analyst Rating of Silver for its cheapest share class and Bronze and Neutral for its more-expensive share classes.

Portfolio manager Rick Figuly, a multidecade firm veteran and head of JPMorgan’s core bond team, leads this effort with the support of comanager Justin Rucker and U.S. fixed-income CIO Steve Lear. Figuly and Rucker work alongside a broader group of experienced portfolio managers in Columbus, Ohio, who have built up a strong record of applying their value-driven approach to selecting attractively valued securities that generate strong cash flows. Their supporting credit research, trading, and operational resources, based across the United States and beyond, are robust and becoming more closely integrated.

Rather than take on significant interest rate risk, the team seeks to outperform its intermediate core bond Morningstar Category rivals by focusing on spread sectors, sensible sector rotation, and strong security selection. The managers keep duration within 10% of the Bloomberg U.S. Aggregate Bond Index and includes only investment-grade bonds at the time of purchase. A historical focus on securitized debt differentiates this strategy from peers and its benchmark; this allocation has included everything from plain-vanilla mortgage passthroughs to commercial mortgage-backed securities, out-of-benchmark agency collateralized mortgage obligations, and nonagency MBS. More recently, in response to changing markets and relative value opportunities, the strategy has begun increasing its allocation to corporate bonds.

Absolute and risk-adjusted performance is strong over the trailing 10 years ended March 2022; its R6 share class posted a 2.6% annualized result, 30 basis points better than peers. In addition, its resiliency when markets have stuttered contributed to a lower level of volatility (as measured by standard deviation) over the same period.

This bond strategy offers investors a consistent, value-driven approach, backed by seasoned portfolio managers and the deep resources of JPMorgan.

Process

| Above Average |

This strategy’s time-tested, value-driven approach underpins a disciplined process to guide this intermediate core bond offering, earning it an Above Average Process Pillar rating.

The managers rely on frequent formal and informal collaboration among this team of generalists to identify timely investment ideas. A combination of proprietary models and the insight of seasoned sector specialists support bottom-up security analysis. The team then sifts through these recommendations to construct a portfolio that offers attractive relative value among investment-grade bond sectors. The strategy minimizes duration and yield-curve positioning as a driver of excess returns, typically keeping duration within 10% of its Aggregate Index benchmark.

This strategy plays to the strengths of JPMorgan’s securitized credit expertise, overweighting various types and structures than its benchmark or typical intermediate core bond category rival. The portfolio historically has comprised 30%-65% of assets in agency MBS, 15%-40% in a combination of corporate and securitized credit, and 15%-35% in U.S. Treasuries. Securities must be investment-grade at the time of purchase, and therefore the team avoids taking on significant credit risk.

This is not a high-,turnover strategy and the comanagers will typically adjust the portoflio gradually based on their current macro outlook and sector views. The team also leverages an array of risk-management tools to oversee risk throughout the process.

People

| Above Average |

Portfolio manager Rick Figuly leads this experienced Columbus, Ohio-based investment team that leverages the deep resources of JPMorgan’s vast fixed-income franchise, earning an Above Average People Pillar rating.

A veteran fixed income investor, Figuly was named head of the firm’s core bond team in late 2019 and has helmed this strategy since 2015 when longtime portfolio manager and strategy architect Doug Swanson retired. Justin Rucker joined him in 2019 and brings more than 20 years of investment experience. Steve Lear, the firm’s U.S. fixed-income CIO, joined the two in 2021 and underscores the firm’s focus on integrating its geographically widespread fixed-income resources.

The value-driven core bond team includes nine generalist portfolio managers with average industry experience of 22-plus years, and two associates. While some have sector specialties, the generalist approach drives each manager to understand all areas of the bond market and encourages cross-pollination of ideas to make better relative value judgments. The team applies its fundamental analysis in selecting compellingly priced cash flows.

The managers lean on the firm’s broadly staffed credit research team, led by Kay Herr, for security recommendations. The global research team includes 21 investment-grade analysts, six structured credit analysts, and various specialists dedicated to quant investing, risk management, and trading. Over the past year, the portfolio management team remained unchanged, but the credit research team experienced some modest turnover because of retirements and departures; these positions were backfilled by experienced researchers.

Parent

| Above Average |

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.

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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Consistency is a hallmark of this strategy, and over various periods has ranked in the upper quartile of peers. Its performance profile relative to its unique intermediate core bond category peers over the long term reflects the managers’ preference for securitized bonds and corporate credit over U.S. Treasuries.

Since Rick Figuly’s tenure from October 2015 through March 2022, this strategy’s R6 share class returned 2.4% annualized and outpaced the Aggregate Index’s 2.1% and median rivals’ 2.2%, while achieving upper-quintile risk-adjusted performance (as measured by Sharpe ratio). That it achieved this result with lower volatility than peers speaks to the team’s ability to select securities with stable cash flows and manage overall risk.

The strategy has shown itself to be a stalwart performer over credit selloffs. When corporate markets sold off both during the commodity-related June 2015 through February 2016 credit drawdown and in the broad market fourth-quarter 2018 sell-off, this strategy posted a positive, top-quintile result in both cases. While stress in securitized markets weighed on results during the coronavirus-driven market collapse between Feb. 20 and March 23, 2020, it still eked out a result stronger than 60% of its rivals.

The strategy’s shorter-than-benchmark duration and high-quality biases helped it hold up versus peers during the most recent rising-rate period; for the year to date through March 2022, the strategy’s 5.4% loss was ahead of 85% of unique peers.

Portfolio

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Prevailing relative value opportunities drive portfolio decisions, and these Ohioans favor spread sectors to lower-yielding U.S. Treasuries. The team’s long-standing bias to securitized bonds of all varieties have held true over time, which makes this portfolio somewhat unique in its intermediate core bond ategory, but more recently, it has highlighted corporate credit opportunities.

As of March 2022, this strategy’s 42% allocation to securitized debt was far heavier than its typical rival’s 32% stake. Exposures to agency MBS (24%), nonagency MBS (8%), commercial MBS (5%), and asset-backed securities (4%) differentiate this strategy from peers and its benchmark. The roughly 8% stake in nonrated bonds stems primarily from its securitized allocation; JPMorgan’s credit research team applies internal ratings, and, as of March 2022, all these positions were deemed to be investment-grade rated. Outside of securitized, the managers are typically underweight in U.S. Treasuries versus the index by 10%-15%. Over the past two years, the managers took advantage of better value in corporate bonds, bringing an approximately 6% underweighting closer to the benchmark’s 29% allocation and favoring financials companies over industrials within this sector.

The strategy’s 5.8-year duration versus its index’s 6.5 years reflects the managers’ defensive posture against the negative impact of rising rates.