JPMorgan Emerging Markets Debt C JEDCX

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 receives an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in A rated bonds and an overweight in debt with 20- to 30-year maturities compared with category peers. The strategy retains its portfolio managers but still earns an Average People Pillar rating, after downgrading from Above Average. The strategy is part of a first-rate parent that has a favorable lineup success ratio and overall low fees. These attributes support its Above Average Parent Pillar rating.

JPMorgan Emerging Markets Debt Fund earns an Average Process Pillar rating.

The leading factor in the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Low costs across its parent firm's funds, whose fees, on average, rank in the middle quintile of their respective category, also influence the rating. The pattern of low expenses at the firm indicates that it is focused on delivering strong results for investors. Lastly, the process is limited by the fund's unimpressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

Compared with other funds in the Emerging Markets Bond Morningstar Category, this fund consistently is sensitive to interest-rate changes. Opening the analysis to additional factors, the portfolio has displayed three biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been significantly underweight A rated bonds. Additionally, there's been a notable overallocation to debt with 20- to 30-year maturities. And finally, the fund leans away from corporate bonds.

This strategy's 12-month yield is 5.1%, lower than its average peers' 5.7%. In addition, it has a 5.9% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, a lower yield comes with the benefit of less credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated BB.

Pierre-Yves Bareau, the longest-tenured manager on the strategy, provides strong guidance, offering over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.5 stars, demonstrating encouraging risk-adjusted performance. Despite having a small team, the two listed managers boast 18 years of portfolio management experience. As a team, they manage two investment vehicles together, with mixed prospects. The asset-weighted average Morningstar Medalist Rating across the strategies is Neutral. This means, in aggregate, they are not positioned to deliver positive alpha. The management team has provided the fund with commendable continuity. There have been no documented departures within the past five years.

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 undershot its average peer by 42 basis points annualized. It also trailed the category benchmark, JPMorgan Emerging Markets Global Diversified Bond Index, by an annualized 2.1 percentage points over the same period.

When risk is properly accounted for, the strategy is not any more compelling. 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.

This share class sits in the costliest quintile of its Morningstar Category. Its pricey expense ratio, taken together with the fund’s People, Process, and Parent Pillars, indicates that this share class could struggle to deliver positive alpha relative to its category benchmark, explaining its Morningstar Medalist Rating of Neutral.