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JPMorgan High Yield R2 JHYZX

Medalist Rating as of | See JPMorgan Investment Hub
  • NAV / 1-Day Return 6.25  /  +0.16 %
  • Total Assets 4.9 Bil
  • Adj. Expense Ratio
    1.250%
  • Expense Ratio 1.250%
  • Distribution Fee Level Above Average
  • Share Class Type Retirement, Medium
  • Category High Yield Bond
  • Credit Quality / Interest Rate Sensitivity Low/Limited
  • Min. Initial Investment
  • Status Open
  • TTM Yield 5.81%
  • Effective Duration 2.74 years

USD | NAV as of Apr 20, 2024 | 1-Day Return as of Apr 20, 2024, 12:09 AM GMT+0

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Morningstar’s Analysis JHYZX

Medalist rating as of .

Encouraging team improvements, but it’s too soon to pound the table for this strategy.

Our research team assigns Neutral ratings to strategies they’re not confident will outperform a relevant index, or most peers, over a market cycle on a risk-adjusted basis.

Encouraging team improvements, but it’s too soon to pound the table for this strategy.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Summary

JPMorgan High Yield’s experienced team, considerable resources, straightforward process, and improved People rating earn a Morningstar Medalist Rating of Neutral for all share classes.

The integration of the firm’s two legacy high-yield teams in September 2019 has emerged as a formidable, cohesive, and stable unit after a transition period marked by higher personnel turnover. Rob Cook, with over three decades of experience, assumed leadership of the firm’s global high-yield platform and was named portfolio manager on the fund. He works alongside seasoned comanagers Jim Shanahan (37 years), Thomas Hauser (30 years), and Jeffrey Lovell (28 years) to collaborate on portfolio decisions. As one of the deeper credit teams in the industry, its 17 dedicated high-yield research analysts bring over 18 years of average industry experience and feature a good balance of newer and veteran researchers.

Effective fundamental credit analysis and collaboration among portfolio managers, analysts, and traders is key here. Bottom-up security selection drives the process, and each sector-focused researcher dives deeply into their respective issuers to build the portfolio. Regular and impromptu meetings ensure ample inputs to discuss broad fund positioning, relative value opportunities, new issues, and individual credits. The managers leverage this information alongside firm-generated risk models around liquidity and sector diversification when positioning the fund relative to its ICE BofA U.S. High Yield Constrained Index. While historical industry weights closely reflect the benchmark, over the past four years since this team was combined, Cook is more willing to feature larger stakes in higher-conviction ideas and deviate more from the benchmark’s duration. The ability to invest in senior secured bank loans gives this team added flexibility.

Compared with its benchmark and peers, long-term returns are only middling. Over the trailing 10 years, the fund’s R6 shares’ 3.3% annualized return through May 2023 was slightly worse than its distinct high-yield bond Morningstar Category median peer’s 3.4% and ranked similarly on a volatility-adjusted basis, as measured by Sharpe ratio. While the team looks to improve results with more concentrated portfolio stakes in high-conviction issuers, performance since this team took over in September 2019 doesn’t stand out, in large part because of a challenging 2020.

Rated on Published on

While staying focused on bottom-up credit selection, this team has shifted to a slightly higher-conviction investment style, which has not yet proved its competitive edge versus peers.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Process

Average

The strategy thus earns an Average Process rating.

Fundamental security analysis and strong collaboration among portfolio managers, analysts, and traders is key here. Credit selection is the foundation of the strategy’s approach, and each sector-focused credit analyst dives deeply into their respective issuers to build a portfolio of best ideas. Regular and impromptu meetings ensure ample inputs to discuss broad fund positioning, relative value opportunities, new issues, and individual credits. The managers then leverage these inputs alongside firm-generated risk models around liquidity and sector diversification when positioning the portfolio relative to its ICE BofA U.S. High Yield Constrained Index, the fund’s new benchmark since Jan. 1, 2023, replacing the Bloomberg U.S. High Yield 2% Issuer Capped Index. While the indexes are substantially similar, the new index, which excludes emerging-markets issues, better reflects the fund’s investment universe.

The emphasis on downside protection promotes diversification and favoring lower capital-intensive issuers with strong free cash flow. While historical industry weights closely reflect the benchmark, Rob Cook is more willing to take larger stakes in higher-conviction trades, both in terms of sector exposure and individual issuers. The team has flexibility to invest in senior secured bank loans, typically between 4% and 8% of assets, and smaller stakes in equities acquired via restructuring; these positions often exceed those of its typical high-yield rivals.

Lead manager Rob Cook’s aim for a beta-neutral fund versus its index means it will not take much more credit risk than its benchmark. Instead, the comanagers draw on security selection to express more concentrated portfolio positions in higher-conviction trades. For example, the fund’s historical sector allocations stayed within a relatively tight band of 4 percentage points around the index’s weight; this new regime has deviated from this playbook, taking larger stakes in higher-conviction sectors like energy and communications, about 7-percentage-point overweights each, and having nearly a 7-percentage-point underweight to financial companies in various periods.

The team also has allowed duration to drift from its benchmark relative to history. However, this is not as much of an active interest-rate bet as a function of security selection and relative value decisions. Since December 2019, when the fund’s duration was shorter than the index by about 0.2 year, the managers allowed duration to deviate by as much as 1.25 years shorter than the index at the end of 2021; it stands about 0.5 years shorter as of March 2023.

The fund also features senior secured bank loans to give the comanagers flexibility to make relative value calls among these non-investment-grade sectors. Historically ranging from 4% to 8%, this stake was near the upper end of this range coming into 2022 and, more recently, pared its allocation to about 6% (as of March 2023).

Rated on Published on

The team is experienced and deep.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

People

Above Average

Over three years removed from the consolidation of JPMorgan’s legacy high-yield groups with stability over the past two, it earns an upgraded People rating to Above Average from Average.

The integration of the firm’s two legacy high-yield teams in September 2019 has emerged as a formidable, cohesive, and stable unit after a transition period marked by higher personnel turnover. Rob Cook, with over three decades of experience, assumed leadership of the firm’s global high-yield platform and was named portfolio manager on the fund. There’s no shortage of experience here with comanagers Jim Shanahan (37 years), Thomas Hauser (30 years), and Jeffrey Lovell (28 years) to collaborate with Cook on portfolio decisions. This close-knit team consolidates its collective inputs, in conjunction with credit analysts and traders, to inform investment decisions. Cook retains final decision-making authority.

A 17-member dedicated high-yield analyst team brings over 18 years' average industry experience and features a thoughtful balance of newer and veteran researchers. Four generalist research associates and five traders add depth. Higher personnel turnover in 2019 and 2020 has ebbed, and the relative stability over the past two years helps drive the upgraded People rating. The only notable recent change was seasoned credit researcher, Bob Amenta, who retired in May 2023; his sector coverage of autos, metals and mining, packaging, and paper were distributed among other senior analysts.

Fund ownership stands out. Cook owns more than $1 million in the strategy, while the other three managers have at least $500,000, demonstrating their commitment alongside investors.

Rated on Published on

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

Associate Director Emory Zink

Emory Zink

Associate Director

Parent

Above Average

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.

Rated on Published on

Long-term performance doesn’t separate this fund from its typical high-yield rival.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Performance

Over the trailing 10 years, the fund’s R6 shares’ 3.3% annualized return through May 2023 was slightly worse than its unique high-yield bond Morningstar Category median peer’s 3.4%; it ranked similarly on a volatility-adjusted basis, as measured by Sharpe ratio.

The team looks to improve the fund’s results with a more concentrated stakes of higher-conviction trades. Since this team took over in September 2019, the fund’s 1.2% annualized return through May 2023 trailed its typical rival and ICE BofA U.S. High Yield Constrained Index by about 40 basis points. Its 2020 underperformance by about 2.5 percentage points hurt longer-term results when the team was slow to deploy a large cash inflow, causing this stake to exceed 10%, resulting in a significant drag on performance. However, it addressed this issue with the ability to buy high-yield ETFs to ensure timely investment of cash.

In less dramatic market conditions, the fund’s measured approach usually caused it to perform in line with peers and the benchmark. The year 2022 was an important test for high-yield strategies; the fund’s 10.3% loss was less severe than its typical peer’s 10.6% drop, but it was about 1 percentage point ahead of its benchmark driven by strong security selection in energy, cable, and technology names and shorter-than-index duration.

Published on

It’s critical to evaluate expenses, as they come directly out of returns.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we don’t think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Neutral.

Published on

Portfolio Holdings JHYZX

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 8.0
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

DISH DBS Corporation 5.875%

1.39 66.6 Mil
Corporate

Cooper-Standard Automotive Inc. 9%

1.20 57.5 Mil
Corporate

Intelsat Jackson Holdings SA 6.5%

1.06 51.1 Mil
Corporate

CCO Holdings, LLC/ CCO Holdings Capital Corp. 4.75%

0.93 44.7 Mil
Corporate

Bausch Health Companies Inc. 5.5%

0.78 37.2 Mil
Corporate

Sirius Xm Radio Inc 5.5%

0.77 37.0 Mil
Corporate

JPMorgan US Government MMkt Instl

0.75 36.0 Mil
Cash and Equivalents

CCO Holdings, LLC/ CCO Holdings Capital Corp. 5%

0.72 34.6 Mil
Corporate

Bausch Health Companies Inc. 9%

0.69 33.2 Mil
Corporate

Bausch Health Companies Inc. 9.25%

0.65 31.2 Mil
Corporate