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JPMorgan Core Plus Bond R6 JCPUX

Medalist Rating as of | See JPMorgan Investment Hub
  • NAV / 1-Day Return 7.19  /  0.00
  • Total Assets 20.2 Bil
  • Adj. Expense Ratio
    0.380%
  • Expense Ratio 0.380%
  • Distribution Fee Level Below Average
  • Share Class Type Retirement, Large
  • Category Intermediate Core-Plus Bond
  • Credit Quality / Interest Rate Sensitivity
  • Min. Initial Investment 15.0 Mil
  • Status Open
  • TTM Yield 4.53%
  • Effective Duration 6.11 years

USD | NAV as of Jun 21, 2024 | 1-Day Return as of Jun 21, 2024, 10:17 PM GMT+0

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Morningstar’s Analysis JCPUX

Medalist rating as of .

A dependable core-plus bond offering.

Our research team assigns Silver ratings to strategies that they have a high conviction will outperform the relevant index, or most peers, over a market cycle on a risk-adjusted basis.

A dependable core-plus bond offering.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Summary

JPMorgan Core Plus Bond benefits from its experienced managers and vast resources that support its collaborative, time-tested process. The retirement announcement of veteran manager and the group’s fixed-income CIO Steve Lear is significant, but J.P. Morgan’s depth of talent tempers any concerns.

Lear will cede CIO duties on Oct. 1, 2023, to the former head of fixed-income research, Kay Herr, who was also named comanager of this strategy in June. Herr’s extensive research background is impressive, but her management experience is limited. With that, Lear will remain with the strategy until March 2024 while Herr transitions to the comanager role. Along with Andrew Norelli, a two-decade veteran and comanager since 2014, this team will continue to drive portfolio decisions. Three additional tenured managers run their respective sleeves of this portfolio: Rick Figuly manages the securitized bucket while Lisa Coleman and Tom Hauser oversee the investment-grade and high-yield credit, respectively. The firm’s large global fixed-income platform and its network of specialists helps guide macro positioning and contribute to bottom-up ideas.

It's hard to poke holes in this time-tested, robust investment process that combines top-down views with diligent security selection and measured risk-taking. Collaboration is key to the strategy’s success. J.P. Morgan’s quarterly investment meeting sets macro themes while weekly sector meetings focus on relative value and tactical positioning. The lead managers synthesize these inputs to inform overall risk, duration and curve positioning, and sector allocation, and work closely with its sector-focused comanagers, who are responsible for bottom-up security selection.

The strategy balances its core bond characteristics with riskier, off-benchmark stakes. Various types of securitized debt feature prominently, typically 35% to 50% of assets. These aren’t plain-vanilla pass-throughs; the team favors mortgage pools that meet their stringent standards that protect against prepayment risk and limit duration extension. High yield credit is the largest non-investment grade allocation, and the team adjusts these stakes to their outlook for risk. A cautious macro view has led the team to reduce high yield to about 10% of assets ending June 2023, about 3-percentage points less than two years ago, while its Treasuries have more than doubled to 38% over the same period.

Long-term results stand out. Since Norelli's March 2014 start, the R6 shares’ 1.8% annualized return through August 2023 beat the Bloomberg U.S. Aggregate Bond Index’s 1.3% and its distinct intermediate core-plus Morningstar Category peer median’s 1.6%. The team’s cautious 2023 economic outlook has led to less credit risk and longer duration, which caused it to lag peers this year to date through August.

Rated on Published on

The lead managers take macro cues to inform broad portfolio themes while the sleeve managers drive bottom-up security selection to earn an Above Average Process rating.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Process

Above Average

J.P. Morgan’s quarterly investment meeting sets macro themes for the subsequent three to six months while weekly sector meetings focus on relative value and tactical portfolio positioning. Steve Lear, Andrew Norelli, and Kay Herr synthesize these inputs to inform the portfolio’s overall risk, duration and curve positioning, and sector allocation. The leads work closely with its sector-focused comanagers across investment-grade credit, high-yield, and securitized debt, who are responsible for bottom-up security selection. While these sleeve managers are measured against their respective internal benchmarks, there is a degree of flexibility to go off-script to reflect prevailing views and take advantage of attractive opportunities; for example, good relative valuations in BBB rated corporate bonds led the mangers to increase this stake to 15% in 2021 from 8% in 2020 despite the investment-grade corporate sleeve’s higher-quality internal benchmark, the Bloomberg U.S. Corporate A3 or Better Index.

This strategy has packed more punch than its Bloomberg U.S. Aggregate Bond Index, holding up to 30% in non-investment-grade bonds. Junk-rated corporates, typically between 5% and 25% of assets, commercial MBS (up to 15%), and non-agency MBS and ABS (each up to 10%) make up most of this allocation. Duration stays in a tight band, typically +/- 10% of the index.

Off-benchmark sectors and the value-driven approach help the managers adjust risk and drive asset allocation.

Various types of securitized debt feature prominently here, typically 35%-50% of assets. Agency-backed mortgage-backed securities normally make up about half of this stake, while non-agency MBS, commercial MBS, and asset-back securities round out the allocation. By comparison, the Bloomberg U.S. Aggregate Bond Index’s approximately 30% in securitized bonds is mostly plain-vanilla agency MBS pass-throughs. This team takes a different approach, focusing on specified MBS pools, CMBS, and ABS that meet their stringent standards and protect against prepayment risk and duration extension.

While investment-grade bonds anchor the core of this portfolio, its off-benchmark stakes drive its risk profile. High-yield credit still makes up the largest allocation to non-investment-grade bonds; yet the fund’s 12.8% of assets in September 2021 has steadily fallen to just below 10% ending June 2023. The team’s cautious economic outlook and higher risk in leveraged companies have given way to a preference for higher-quality bonds in 24 months while the portfolio’s Treasury stake has more than doubled to 38% of assets over the same period.

The managers may make modest yield-curve adjustments. When 2022’s inflation concerns caused yields to rise, the managers shortened the portfolio’s duration to 0.3 years less than its index, as of September 2022, from 0.1 year short six months prior. While this drove outperformance in the calendar year, the team’s 2023 recessionary outlook meant reversing course. With that, the duration lengthened to about 0.3 year longer than the benchmark, which is where it stood as of June 2023.

Rated on Published on

Seasoned managers and robust supporting resources anchor this strategy, but the retirement of longtime manager and fixed-income CIO keeps its People rating at Above Average.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

People

Above Average

In June 2023, J.P. Morgan announced Steve Lear’s retirement effective March 2024 and Kay Herr’s promotion to fixed income CIO effective October 2023; she was also named comanager on the fund effective immediately. The firm has given ample notice for a smooth leadership transition, but Lear’s experience will be missed. Herr’s research background is extensive, but her management experience is limited. Lear will remain on the fund for the time being, while the other co-lead, Andrew Norelli, will work closely as a team to guide asset allocation decisions. Norelli, who brings over two decades of investment experience, joined the strategy in 2014. Three additional veteran comanagers each represent the fund’s sleeves. Rick Figuly manages the securitized sleeve (roughly 40% of assets) and has been on the fund since 2006, while Lisa Coleman and Tom Hauser oversee the investment-grade (20%) and high-yield credit sleeves (10%), respectively, joined in July 2020.

This group doesn’t want for resources. Alongside the comanagers, the firm’s large Global Fixed Income, Currency & Commodities platform and its network of fixed income specialists help guide macro positioning and contribute to bottom-up ideas.

The managers’ personal ownership aligns their interests with investors’. Lear has at least $1 million, Norelli between $500,000 and $1 million, and Herr between $100,000 and $500,000.

Rated on Published on

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

Associate Director Emory Zink

Emory Zink

Associate Director

Parent

Above Average

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various global cohorts and diverse asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

Rated on Published on

This strategy has proved a formidable long-term performer with an eye to downside protection.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Performance

During Andrew Norelli's tenure from March 2014, the strategy’s R6 shares’ 1.8% annualized return through August 2023 beat the Bloomberg U.S. Aggregate Bond Index’s 1.3% and its distinct intermediate core-plus Morningstar Category peer median’s 1.6%. The result was ahead of two thirds of peers while its Sharpe ratio, a measure of excess return relative to excess standard deviation, was even better, outpacing more than 70% of rivals.

Consistency has been a hallmark. The strategy beat its peers and benchmark in seven of the last ten calendar years. In years where the fund trailed that group, it only fell short by 40 basis points on average. This is not unexpected given its lower volatility, as measured by standard deviation, versus peers. This especially shows up in stress periods, where the fund typically holds up better than most. During 2022’s first quarter and the start of the Russia-Ukraine war, the fund's 5.4% loss was less severe than its median peer’s 5.8% drop; and at the beginning of 2020’s coronavirus-driven pandemic, its 2.8% drop was better than 70% of its rivals.

Amid 2022’s inflation concerns and rising yields, the fund’s shorter-than-index duration profile helped its calendar year 12.7% loss hold up better than 70% of peers. However, when the managers’ 2023 recessionary outlook, and the view that long-term yields would fall, led them to increase interest-rate risk, the portfolio’s longer-than-index duration kept its 2.6% gain for the year-to-date through August slightly below its median peer.

Published on

It’s critical to evaluate expenses, as they come directly out of returns.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Silver.

Published on

Portfolio Holdings JCPUX

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 8.5
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

JPMorgan Prime Money Market Inst

7.18 1.5 Bil
Cash and Equivalents

Federal National Mortgage Association 2.5%

1.93 392.5 Mil
Securitized

Government National Mortgage Association 5%

1.22 249.3 Mil
Securitized

United States Treasury Notes 1.125%

0.99 201.1 Mil
Government

United States Treasury Notes 1.25%

0.79 161.6 Mil
Government

United States Treasury Notes 0.5%

0.78 159.1 Mil
Government

Government National Mortgage Association 5.5%

0.74 151.0 Mil
Securitized

United States Treasury Bonds 2.375%

0.68 137.6 Mil
Government

Invesco Senior Loan ETF

0.48 97.8 Mil

Federal National Mortgage Association 2.898%

0.44 89.2 Mil
Securitized