JPMorgan U.S. Sustainable Leaders Fd earns an Above Average Process Pillar rating.
The most important driver of the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Excellent risk-adjusted performance also bolsters the process. 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 tends to pick smaller market-cap companies compared with the average fund in its peer group, the Large Blend Morningstar Category. But in terms of investment style, it is on par with peers. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. 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 stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. 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. Its preference for stocks with lower yields may well lead to a growthier portfolio. However, growth stocks court additional risks if their forecasts do not come to fruition and are often more volatile than companies with stable dividends. 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 strategy owns 77 securities and is diversified among those holdings. In its most recent portfolio, 40.6% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category’s 50.1% average. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.