JPMorgan Small Cap Growth R6 JGSMX

A strong management team and sound investment process underpin JPMorgan Small Cap Growth R6's Morningstar Quantitative Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.

The longest-tenured portfolio manager's extensive experience drives the strategy's Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating. The portfolio has been significantly underweight quality exposure and has an overweight in volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy belongs to a strong asset-management firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a favorable lineup success ratio and overall low fees.

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 Small Cap Growth Fund earns an Above Average Process Pillar rating.

This strategy hews closely to the market-cap and investment style of its Small Growth category peers. Examining additional factor exposure, this strategy favors low-quality stocks. Such positions do not tend to provide much ballast for a portfolio. The strategy is also historically less exposed to the factor compared with Morningstar Category peers. The managers have also shown an overweight risk tilt, demonstrated by high-volatility exposure. These stocks are at their best when markets are as well. High-volatility exposure contributes to stronger performance during bull markets at the cost of losing more on the downside. And compared with category peers, the strategy historically has had more exposure. Additionally, given the high trading volume of holdings, this fund holds highly liquid assets. The strategy has chosen to offer investors a relatively safer harbor, although there is some evidence to indicate investors earn a premium for bearing this risk. And the portfolio has more exposure than its Morningstar Category peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.

The portfolio is overweight in consumer cyclical and healthcare relative to the average peer in its category by 4.0 and 3.5 percentage points in terms of assets, respectively. The sectors with low exposure compared to their category peers are financial services and basic materials, with financial services underweighting the average portfolio by 5.1 percentage points of assets and basic materials similar to the average. The portfolio is composed of 130 holdings and assets are more dispersed than the typical peer in the category. In the most recent disclosure, 17.6% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category average's 26.5%. And in closing, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

JPMorgan Small Cap Growth Fund's longest-tenured manager and seasoned portfolio managers support its Above Average People Pillar rating. Eytan M. Shapiro’s veteran status, with over 25 years of portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, demonstrating underwhelming risk-adjusted performance. Eytan M. Shapiro has an experienced listed co-manager. Together, they average 23 years of portfolio management experience. As a team, they manage two investment vehicles together, with a Silver asset-weighted average combined Morningstar Analyst and Quantitative Rating, demonstrating their potential to deliver positive alpha in aggregate.

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.

Outpacing both its peers and the category benchmark, this strategy’s Retirement share class, has had a noteworthy track record. This share class led its average peer by an annualized excess return of 2.2 percentage points over a 10-year period. And it also beat the category index's, Russell 2000 Growth Index's, gain by an annualized 2.6 percentage 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. Often, higher returns are associated with more risk. However, this strategy hewed close to the benchmark's standard deviation. However, 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.

Because fees compound over time and diminish returns, it is critical for investors to minimize expenses. This share class sits in the cheapest quintile of its Morningstar Category. Its low 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 versus its category benchmark, explaining its Morningstar Quantitative Rating of Silver.