JPMorgan Emerging Markets Debt R5 JEMRX

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

The strategy has been able to retain portfolio managers, which builds stability and continuity and results in an Above Average People Pillar rating. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial underweight position in A rated bonds and has a substantial overweight in debt with 20- to 30-year maturities compared with category peers. 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 Emerging Markets Debt Fund earns an Average Process Pillar rating.

The most important driver of the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 57% also contributes to the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the process has struggled over that period.

Compared with other funds in the Emerging Markets Bond Morningstar Category, this fund has been consistently sensitive to interest-rate changes over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the category average, the managers have been substantially underweight A rated bonds in recent years. Different from its historical appetite, however, the portfolio's credit quality was in line with the Morningstar Category peers in recent months. Additionally, there's been a notable overallocation to debt with 20- to 30-year maturities over the past few years. In the most recent month, however, the fund's exposure to debt with 20- to 30-year maturities was in line with the Morningstar Category average. Finally, during the past few years, the fund leaned away from corporate debt. In recent months, the strategy also had less exposure to corporate debt compared to its peers.

This strategy has a modest 5.6% 12-month yield, lower than its average peers' 5.9%. It also has a 6.3% 30-day SEC yield (a measure similar to yield-to-maturity). A lower yield tends to indicate lower 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.

The main contributor to the rating is its parent firm's five-year success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. Management team experience, which averages 19 years at this fund, also supports the rating. Lastly, the rating is limited because none of the managers have over$ 1 million invested in the fund.

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.

It has provided mixed returns compared with peers, but subpar returns compared with the category benchmark. Over an eight-year period, this share class' underperformed the category’s average by an annualized 1.0 percentage point. But when expanded to a 10-year period, it outperformed the average by 20 basis points. However, it was more difficult to outpace the category index, JPMorgan Emerging Markets Global Diversified Bond Index, where it lagged by an annualized 1.1 percentage points over the same 10-year 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. This subpar risk-adjusted performance has not resulted in higher volatility, as measured by their standard deviation, which is close to the benchmark. However, 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.

This share class is within the second-cheapest quintile of its Morningstar Category. Its competitive expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class is well-positioned to generate positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Bronze.