JPMorgan Small Cap Blend I JDSCX

The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.

The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and momentum exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The management team's considerable industry experience earns it an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Small Cap Blend Fund earns a High Process Pillar rating.

The leading factor in the rating is the fund's strong 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 parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also contributes to the process. The parent firm's five-year risk-adjusted success ratio of 55% supports the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their commendable success ratio suggests that this firm does well for investors and that this fund may benefit from that.

This strategy has more exposure to the Growth factor than the Small Blend Morningstar Category average. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Looking at additional factor exposure, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also demonstrated a bias towards lower-momentum stocks over its peers over the past years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This is a higher-risk, higher-reward approach. In this month, the strategy also had more exposure to the Volatility factor over 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 technology by 4.0 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 financial services and industrials; however, the allocations are similar to the category. The strategy owns 246 securities and is diversified among those holdings. In its most recent portfolio, 11.2% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 25.8%. And finally, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.

Eytan M. Shapiro, the longest-tenured manager on the strategy, provides strong guidance, offering over 25 years of listed portfolio management experience. Despite having a small team, the two listed managers boast over 30 years of listed portfolio management experience. The highest personal investment in this offering by any of its managers is at least$ 1 million. An investment of that size is large enough to align managers' interests with investors.

Note: The People Pillar rating is indirectly assigned by an analyst. At least one of the managers on this fund manages a different product rated by an analyst. The analyst-assigned People Pillar rating(s) for these managers are combined with algorithmic scores for any non-covered managers on a tenure-weighted basis.

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.

The share class outstripped the category index, Russell 2000 Index, with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. Notably, these strong risk-adjusted results have not come with more volatility for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Fortunately, when looking at the fund's long-term absolute returns, it came out ahead. This share class surpassed the category index over the past 10-year period, outperforming by an annualized 3.6 percentage points. It has also come out ahead of peers by an annualized 2.5 percentage points, over the same 10-year period.

This share class levies a fee that ranks in its Morningstar Category's middle quintile. Even with this fee, the fund’s People, Process, and Parent Pillars suggest this share class can deliver positive alpha relative to its category benchmark, earning it a Morningstar Medalist Rating of Gold.