JPMorgan Mid Cap Equity Fund earns an Above Average Process Pillar rating.
The largest contributor to the rating is the fund's impressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The stability of the management team also strengthens the process. Specifically, the fund has not seen a manager change in the last ten years. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.
This strategy leans toward larger, higher-growth companies than its average peer in the Mid-Cap Blend Morningstar Category. Looking at additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also exhibited an overweight liquidity risk tilt, evidenced by holding companies with relatively lower trading volumes than peers in these years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. Similarly, in recent months, the strategy also had less exposure to the Liquidity factor than peers. Additionally, this strategy has demonstrated a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. In recent months, the strategy also had less Volatility factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.
The portfolio is overweight in financial services by 3.1 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are basic materials and consumer cyclical, with basic materials underweighting the average portfolio by 2.5 percentage points of assets and consumer cyclical similar to the average. The portfolio is composed of 199 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 11.7% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category’s 15.5% average. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.