Although JPMorgan U.S. Large Cap Core Plus benefits from experienced hands, deep resources, and a decent process, the managers running this fund must prove their value. The strategy earns a Morningstar Analyst Rating of Neutral for all share classes.
Seasoned portfolio manager Susan Bao has been involved with the strategy since its launch in 2007. She used to comanage the fund with Tom Luddy, but since he stepped down in 2017, Steven Lee is her partner on the fund. Whereas Bao had been the lead manager and key decision-maker, as of 2020 Bao and Lee split sector coverage and have decision-making power for their respective sectors, with Bao focusing on consumer, financials, and healthcare, while Lee is the lead for industrial/commodities, technology, and utilities/telecom.
The duo relies on a large and experienced sector analyst team comprising more than 20 analysts with two decades of experience on average. Although this team gives the fund impressive firepower to conduct fundamental bottom-up research, it has seen turnover in recent years and stock-picking has been uneven.
The strategy rests on a sound philosophy and a consistently applied, robust process. The analysts produce a long-term fair value estimate for each security, based on an in-house dividend discount model. Stocks are then ranked into quintiles from most attractive to least. This strategy can benefit from their insights on both the long-only leg and the 30/30 long-short extension.
The long-only leg of this fund mostly consists of stocks ranked in the first and second quintiles, although stocks scored lower might be held for risk-reduction purposes. The 30/30 extension is broadly sector-, style-, and beta-neutral, where the managers pick shorts within the lowest quintiles. This leads to a very diversified portfolio of 250-350 positions. Short exposure generally stands at 20%-30%, with the portfolio's net exposure to the market kept at 100%. Despite the multiple levers they can pull, the managers have not been able to consistently add value on a risk-adjusted basis.