JPMorgan Diversified I JDVSX

JPMorgan Diversified I’s strong process and parent firm support this strategy's Morningstar Quantitative Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.

The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in the Europe-Developed region and an underweight in developed markets regions compared with category peers. The strategy belongs to a strong asset-management firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a high lineup success ratio and overall affordable fees. Finally, this management team has a wealth of experience, but still gets an Average People Pillar rating.

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. JPMorgan Diversified Fund earns an Above Average Process Pillar rating.

This strategy maintains a fixed-income to equity allocation very similar to Allocation--50% to 70% Equity peers, with a 36.0% to 57.9% fixed-income to equity weighting. Looking exclusively at the portfolio's equity sleeve, the strategy has exhibited a consistent portfolio bias toward both smaller market-cap and growth-oriented companies versus the typical peer in the category. The strategy has three region or sector biases compared to category peers. The most noteworthy bias is to the Developed Europe region where the portfolio is relatively overallocated. It also has maintained an underweight position in developed markets regions. And finally, the portfolio has sustained underweight exposure to the healthcare sector compared with peers.

The current average price/earnings ratio of holdings is 17.3 opposed to the category average's 18.2. A similar markup indicates that investors expect similar growth in this strategy's stocks compared with stocks held by other strategies in this category. The portfolio has allocations in its top 2 sectors, financial services and consumer cyclical, that are similar to the average portfolio in the category. The sectors with low exposure compared to their category peers are technology and communication services; however, the allocations are similar to the average category portfolio. The portfolio is overweight in Developed Europe and Japan regions relative to the average peer in its category by 7.8% and 2.8% of assets, respectively. The regions with low exposure compared to their category peers are North America and Australasia, with North America underweight the average portfolio by 12.8% of assets and Australasia similar to the average.

Despite its managers' lack of personal investment, JPMorgan Diversified Fund benefits from an experienced corps of managers. Together, this earns the team an Average People Pillar rating. Jeffrey A. Geller, the longest-tenured manager on the strategy, boasts 21 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, demonstrating underwhelming risk-adjusted performance. Jeffrey A. Geller has an experienced backdrop of support. The three listed managers boast 15 years of average portfolio management experience. As a team, they manage three investment vehicles together, with a Bronze asset-weighted average combined Morningstar Analyst and Quantitative Rating, indicating the potential to deliver positive alpha in aggregate. None of the managers here invests any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of 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.

This strategy's Institutional share class has lapped both its peers and the category benchmark. This share class outpaced its average peer by 73 basis points annualized over a 10-year period. And it also outperformed the category index's, Morningstar Moderate Target-Risk Index's, gain by an annualized 100 basis points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class outstripped the 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 a rockier ride for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself effective by generating positive alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

It is important to pay attention to fees, as lower-cost investments maximize investors' returns. This share class lands in the second-cheapest quintile of its Morningstar Category. Its affordable fee, paired with the fund’s People, Process, and Parent Pillars, results in a judgment that this share class is well-positioned to generate positive alpha compared with its category benchmark, leading to its Morningstar Quantitative Rating of Bronze.