JPMorgan U.S. GARP Equity’s process relies on several common factors, resulting in a Morningstar Analyst Rating of Neutral across all share classes.
This strategy combines quantitative and fundamental elements to try to outperform the Russell 1000 Growth Index. It is sensible and repeatable, but not very distinctive. It starts with a quantitative model screening the U.S large- and mid-cap universe for stocks displaying the best combination of value, quality, and momentum characteristics. The model will look at some traditional metrics such as price ratios for valuation, but it also includes more advanced features, such as language processing components that analyze earnings call transcripts for possible indications about business direction. While many quant strategies use similar characteristics, this strategy also has a group of fundamental analysts that reviews the model to ensure accuracy. They don’t make forecasts but adjust the model’s inputs to reflect one-time items or other material events. The managers can modify the strategy’s exposure to its target factors based on well-defined rules.
In May 2021, Andrew Stern took over as lead manager following the departure of previous longtime manager Jason Alonzo. But Stern is not a stranger to the strategy. He has been an analyst here for more than a decade and a comanager for a few years too. Stern works alongside Wonseok Choi, who leads the quant group’s efforts. But the managers have had to navigate several departures in recent years, including Alonzo’s. The remaining team has the benefit of leaning upon some of JPMorgan’s broader resources, but the increased turnover is a concern.
The fund’s performance in 2019 and 2020 struggled, but it has improved lately. In those earlier years, the fund’s shift toward value stocks backfired as growth stocks outperformed the broader market. But since the start of 2021 through October 2022, the I shares’ 2.6% cumulative loss still beat the index by 3.7 percentage points. Sticking to their principles has paid off, as Morningstar’s risk attribution showed that the strategy’s value exposure was one of the main contributors to its recent success.