JPMorgan Developed International Value I JIESX

The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.

The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and an overweight in volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The management team's large personal investment in the strategy helps it earn an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Developed International Val Fd earns a High Process Pillar rating.

The main 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 contributes to 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. The parent firm's five-year risk-adjusted success ratio of 55% contributes to the process. 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. Their noteworthy success ratio suggests that this firm does well for investors and that this fund may benefit from that.

This strategy skews toward smaller, more value-oriented companies than its average peer in the Foreign Large Value Morningstar Category. Analyzing additional factors, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. 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. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield 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 financial services and energy relative to the category average by 11.6 and 3.0 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer defensive, underweight the average by 6.8 and 6.3 percentage points of assets, respectively. The portfolio is positioned across 241 holdings and is relatively top-heavy. Of the strategy's assets, 18.2% are concentrated within the top 10 holdings, as opposed to the category’s 13.8% average. And finally, 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.

The main contributor to the rating is its parent firm's five-year success ratio of 55%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The portfolio managers' outperformance at the funds they run, as measured by their combined three-year manager excess returns, also supports the rating.

Michael Barakos, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. Michael Barakos is supported by an experienced team, being able to draw on three additional listed managers, who average 18 years of listed portfolio management experience. There has been limited turnover among the portfolio-management ranks, which has provided stability for the investment strategy. Stability tends to go hand in hand with positive results. There have been no documented departures within the past five years.

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.

Over a 10-year period, this share class outperformed the category’s average return by 18 basis points annualized. And it also exceeded the return of the category benchmark, the MSCI ACWI ex USA Value Index, by an annualized 68 basis points over the same period. One-year performance does not largely affect this share class' rating. However, its impressive 31.2% return is worth mentioning, an 11.3-percentage-point lead over its average peer, placing it within the top 10% of its category.

The risk-adjusted performance only continues to make a case for this fund. The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. Often, higher returns are associated with higher risk. This strategy is no exception, with a standard deviation of 17.4% exceeding the benchmark's 16.0%. However, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

It is good practice to weigh them heavily in any investment evaluation. This share class is within the second-cheapest quintile of its Morningstar Category. Its competitive fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class should be able to deliver positive alpha relative to its category benchmark, leading to its Morningstar Medalist Rating of Silver.