JPMorgan Diversified C JDVCX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.

The strategy’s management team earns an Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in the Europe-Developed region and the financial services sector compared with category peers. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan Diversified Fund earns an Above Average Process Pillar rating.

The main driver of the rating is the parent firm's five-year risk-adjusted success ratio of 57%. 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. Impressive risk-adjusted performance also supports the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

This strategy maintains a fixed-income weighting similar to Moderate Allocation peers, but holds more assets in equities, with a 35% to 60% fixed-income to equity composition. Its equity sleeve has been persistently biased to growth stocks compared with the category average. Although in terms of market-cap exposure, it resembles most peers. The strategy has three region or sector biases compared to category peers. The most noteworthy bias is a consistent overweight in the Developed Europe region. It also maintains an overweight bias toward the financial services sector. And finally, the portfolio has invested less in developed markets regions than peers.

The portfolio has allocations in its top two sectors, consumer cyclical and financial services, that are similar to the category. The sectors with low exposure compared to category peers are communication services and consumer defensive, with communication services underweighting the average portfolio by 2.7 percentage points of assets and consumer defensive similar to the average. The portfolio is overweight in Developed Europe and Developed Asia regions relative to the category average by 9.7 percentage points and 3.0 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Middle East and Africa, with North America underweight the average by 18.0 percentage points and Middle East and Africa similar to the average.

Jeffrey A. Geller, the longest-tenured manager on the strategy, boasts 23 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 3.1 stars, demonstrating average risk-adjusted performance compared with category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 16 years of listed portfolio management experience. As a team, they manage three investment vehicles together, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. The highest personal investment in the fund by any of its managers is between$ 500,000 and$ 1 million. That's on the low side--it would need to be more than$ 1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other 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.

Over a 10-year period, this share class' 5.9% gain mirrored the category's average return. And it outperformed the category index, the Morningstar Moderate Target-Risk Index, by an annualized 21 basis points over the same period.

When adjusting for risk, the fund is less favorable. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. But notably, these subpar risk-adjusted results have not come with more volatility than the benchmark, as measured by standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class charges a fee that places it in its Morningstar Category's most expensive quintile. Even with this fee, the fund’s People, Process, and Parent Pillars indicate this share class can produce positive alpha relative to its category benchmark, earning it a Morningstar Medalist Rating of Bronze.