JPMorgan U.S. Applied Data Sci Val C JIVCX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.

The portfolio management team has made an effort to align personal interests with shareholders by investing alongside them. This positively supports the strategy's Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight 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 strategy belongs to a strong firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a favorable lineup success ratio and overall low fees.

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 impressive risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also supports the rating. Lastly, the process is limited by being an actively managed strategy. Historical data, such as 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 firms compared with the average fund in its peer group, the Large Value Morningstar Category. But in terms of investment style, it is on par with peers. Examining additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past 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 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 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. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. 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 positioned across 101 holdings and is less top-heavy than peers. Specifically, 21.6% of the portfolio's assets are concentrated within 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.

Over a 10-year period, this share class undershot its average peer by 53 basis points annualized. It was also not able to outpace the category benchmark, Russell 1000 Value Index, where it trailed by an annualized 86 basis points over the same period.

When risk is properly accounted for, the strategy is not any more compelling. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index over the trailing 10-year period. But notably, these subpar risk-adjusted results have not come with more volatility than the benchmark, as measured by standard deviation.

This share class is within the costliest quintile of its Morningstar Category. Its unattractive expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class could struggle to deliver positive alpha relative to its category benchmark, explaining its Morningstar Medalist Rating of Neutral.