JPMorgan U.S. Applied Data Sci Val A JIVAX

The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.

The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The management team aligns their interests with shareholders by investing alongside them, but it still gets an Average People Pillar rating. The strategy is part of a first-rate parent that has a competitive lineup success ratio and overall affordable fees. These attributes support its Above Average Parent Pillar rating.

JPMorgan U.S. Applied Data Science Value earns an Above Average Process Pillar rating.

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 59%. 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 parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also influences the rating. 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 prefers smaller market-cap companies compared with the average fund in its peer group, the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it is similar. Analyzing additional factors, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to suffer from a significant loss. 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. 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. 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 industrials by 3.4 percentage points in terms of assets compared with the category average, and its real estate allocation is similar to the category. The sectors with low exposure compared to category peers are technology and consumer defensive, with technology underweighting the average portfolio by 4.1 percentage points of assets and consumer defensive similar to the average. The portfolio is composed of 101 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 21.6% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 28.9%.

This warrants an Average People Pillar rating. The team is backed by Wonseok Choi, the longest-tenured manager on the strategy, who brings 17 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.9 stars, demonstrating average risk-adjusted performance. Wonseok Choi draws on only two other listed supporting managers. Although, together they are adequately equipped, with eight years of average portfolio management experience. The highest personal investment by any of the strategy's managers is between$ 50,000 and$ 100,000. That is too low to promote alignment of their interests with the fund's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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.

It has provided similar returns compared with peers, but subpar returns compared with the category benchmark. Over an eight-year period, this share class' underperformed the category’s average by an annualized 46 basis points. But when expanded to a 10-year period, it matched the average's 8.4% return. However, it was not able to outperform the category index, Russell 1000 Value Index. It trailed by an annualized 32 basis points over the same 10-year period.

When adjusting for risk, the fund does not hold up. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. However, this strategy stayed in line with the benchmark's standard deviation.

This share class levies a fee that places it in its Morningstar Category's middle quintile. Despite this fee, the fund’s People, Process, and Parent Pillars indicate this share class can produce positive alpha relative to its category benchmark, garnering a Morningstar Medalist Rating of Bronze.