JPMorgan Diversified R6 JDVZX

The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.

The strategy's effective investment philosophy supports 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 the consumer cyclical sector compared with category peers. The strategy’s management team earns an Above Average People Pillar rating. 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 leading factor in the rating is the fund's impressive 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 excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also contributes to the process. 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 33% to 64% fixed-income to equity composition. Its equity sleeve maintains a persistent bias to growth stocks versus the category average. Although in terms of market-cap exposure, it is close to average. The strategy has three region or sector biases compared to category peers. The most notable is its consistent overexposure to the Developed Europe region. It also routinely positions more assets in the consumer cyclical sector. And finally, in the fund's most recent portfolio, less assets were allocated to developed markets regions. Although, this bias has not existed over time.

The portfolio is overweight in consumer cyclical by 3.1 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and healthcare, underweight the average by 2.9 and 2.6 percentage points of assets, respectively. The portfolio is overweight in Developed Europe and Japan regions relative to the category average by 8.2 percentage points and 2.9 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 16.7 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. 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 a Bronze asset-weighted algorithmically-assigned average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha in aggregate. The management team is invested in the fund, but the maximum investment by any manager is between$ 500,000 and$ 1 million. An investment of more than$ 1 million would be ideal to align managers' interests with those of the fund'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 the past three-year period, it beat the category index, the Morningstar Moderate Target-Risk Index, by an annualized 1.2 percentage points, but matched the category average. And more importantly, when extended to a longer time frame, the strategy came out ahead. On a five-year basis, it led the index by an annualized 1.8 percentage points.

The risk-adjusted performance only continues to make a case for this fund. The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing five-year period. These strong risk-adjusted results have not come with a bumpier 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 period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

It is good practice to weigh them heavily in any investment evaluation. This share class is in the cheapest quintile of its Morningstar Category. Its low fee, taken together with the fund’s People, Process, and Parent Pillars, indicates that this share class has high potential to deliver positive alpha compared with its category benchmark, explaining its Morningstar Medalist Rating of Bronze.