JPMorgan Small Cap Growth Fund earns an Above Average Process Pillar rating.
The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Excellent risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.
This strategy hews closely to the market cap and investment style of its Small Growth category peers. Looking at additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects will rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility factor over its 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 technology and consumer cyclical relative to the category average by 4.3 and 3.5 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and communication services, with financial services underweighting the average portfolio by 5.8 percentage points of assets and communication services similar to the average. The strategy owns 129 securities and is diversified among those holdings. In its most recent portfolio, 16.5% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 26.2%. And finally, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.