JPMorgan U.S. Sustainable Leaders Fd earns an Above Average Process Pillar rating.
The main contributor to 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 beat their respective category's median Morningstar Risk-Adjusted Return for the period. The stability of talent across its parent firm also contributes to the process. The firm's asset-weighted manager tenure of 16 years demonstrates its ability to retain portfolio managers. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.
This strategy, over time, has preferred smaller market-cap companies, compared with others in the Large Blend Morningstar Category. But in terms of style (value/growth) exposure, it is similar. Looking at additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This is a higher-risk, higher-reward approach. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Additionally, the strategy had less exposure to high-quality stocks compared with Morningstar Category peers in recent months. Lacking this ballast, the fund's prospects will rest on its ability to surpass peers during economic booms. 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 has allocations in its top two sectors, technology and financial services, that are similar to the category. The sectors with low exposure compared to category peers are consumer defensive and energy, with consumer defensive underweighting the average portfolio by 2.7 percentage points of assets and energy similar to the average. The portfolio is composed of 75 holdings and its assets are more dispersed than peers in the category. In particular, 39.1% of the fund’s assets are concentrated in the top 10 fund holdings, compared to the category average's 50.5%. And in closing, 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.