JPMorgan U.S. Sustainable Leaders Fd earns an Above Average Process Pillar rating.
The primary contributor to the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Strong 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, 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 investment style, it is on par with peers. Analyzing additional factors, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last 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 has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. Such exposure tends to pay off when markets are hot and to be costly when they are not. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, the strategy had less exposure to high-yield stocks compared with Morningstar Category peers in recent months. This is demonstrated by the portfolio's low exposure to dividends or buybacks. While companies with high yields provide consistent income payments, they may cut payouts if their earnings decline. 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 healthcare, 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 2.8 percentage points of assets and energy similar to the average. The portfolio is composed of 77 holdings and its assets are more dispersed than peers in the category. In particular, 40.6% of the fund’s assets are concentrated in the top 10 fund holdings, compared to the typical peer's 50.1%. And in closing, in terms of portfolio turnover, this portfolio's holdings turn over more often than comparable products in its peer group, possibly resulting in higher costs for investors and a drag on performance.