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JPMorgan US Large Cap Core Plus C JLPCX

Medalist Rating as of | See JPMorgan Investment Hub
  • NAV / 1-Day Return 14.39  /  −1.37 %
  • Total Assets 2.0 Bil
  • Adj. Expense Ratio
    1.450%
  • Expense Ratio 2.230%
  • Distribution Fee Level Low
  • Share Class Type Level Load
  • Category Large Blend
  • Investment Style Large Growth
  • Min. Initial Investment 1,000
  • Status Open
  • TTM Yield
  • Turnover 99%

USD | NAV as of Apr 12, 2024 | 1-Day Return as of Apr 12, 2024, 11:18 PM GMT+0

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Morningstar’s Analysis JLPCX

Medalist rating as of .

Effective execution of a sensible process earns the strategy an upgrade.

Our research team assigns Bronze ratings to strategies they’re confident will outperform a relevant index, or most peers, over a market cycle on a risk-adjusted basis.

Effective execution of a sensible process earns the strategy an upgrade.

Director Jeffrey Schumacher

Jeffrey Schumacher

Director

Summary

Experienced and capable managers who effectively exploit their deep bench of analysts make this an appealing strategy. Their sensible and well-structured approach combined with the manager’s stock-picking talent has led to an upgrade of the Process Pillar to Above Average from Average. The People Pillar's Above Average rating remained unchanged.

Susan Bao has managed this strategy since inception in 2005. She’s a J.P. Morgan veteran who joined in 1997 as an analyst and earned her spurs as a portfolio manager when teaming up with her mentor, Tom Luddy. The duo first ran a sleeve of long-only strategy JPMorgan US Equity since 2001 and managed together this 130/30 strategy since its launch. Luddy stepped down from portfolio management at the end of 2017. Bao retained a smaller sleeve on the long-only fund to ultimately hand it over to Scott Davis as the multisleeve approach was abandoned in 2020.

On this strategy, Luddy was succeeded by Steven Lee, who manages JPMorgan Research Market Neutral, the firm's long-short strategy, which serves as the blueprint for this strategy’s 30/30 extension. The managers have been effectively collaborating since 2018 and demonstrated their ability to generate alpha from both long and short ideas provided by the analyst team. While turnover remains a watch point, this sizable career analyst team has been instrumental to the strategy’s success and gives it ample resources to conduct in-depth fundamental research.

The strategy looks sensible and is designed to fully exploit the analyst recommendations by taking long positions in top-ranked companies while shorting stocks disliked by the analysts. Classic fundamental bottom-up research should give the fund an informational advantage, where the managers implement long and shorts through pair trades but can also apply a thematic view to generate trade ideas. Short exposure generally stands at 20%-30%, with the portfolio's net exposure to the market kept at 100%. Although the managers have intentionally increased the portfolio’s concentration a bit since mid-2021, it remains a well-diversified and benchmark-aware portfolio, but the managers have demonstrated their ability to generate alpha through both long and short ideas generated by the analyst team.

The strategy’s performance since inception, which still has some relevance given Bao’s involvement, has been outstanding, beating the Morningstar Category average and the Morningstar US LM NR USD category index over various time horizons. Since Lee’s arrival, performance has also been strong, beating both yardsticks and with solid contributions from both long and short positions, particularly in 2020, 2021, and 2023.

Rated on Published on

The strategy rests on a solid philosophy and a clearly designed and consistently applied bottom-up process.

Director Jeffrey Schumacher

Jeffrey Schumacher

Director

Process

Above Average

The managers’ proven ability to effectively exploit the alpha potential of the firm’s deep bench of sector analysts through longs and shorts earns the strategy an upgrade of the Process Pillar rating to Above Average from Average.

The vast analytical resources backing the strategy are paramount for its success. The analyst team applies a strategic classification framework to classify companies as Premium, Quality, Trading, or Structurally Challenged, based on their economics, duration of value creation, and corporate governance. Companies belonging to the first two groups are favored in the long sleeve of the portfolio, whereas the latter bucket is sourced to identify shorting candidates. This is followed by the analysts' long-term valuation forecasts. Those derive from an in-house dividend-discount model that is fed by the team's earnings, cash flow, and growth-rate estimates. The analysts rank stocks in each industry based on their estimated fair value. The managers incorporate these rankings into their stock-picking, expressing modest sector preferences based on their macroeconomic view. The benchmark-aware and diversified long-only leg of this strategy mostly consists of stocks ranked in the first and second quintiles, although stocks scored lower might be held for risk-reduction purposes. The 30/30 extension is broadly sector-, style-, and beta-neutral, where the managers typically pick shorts within the lowest quintiles. The duo can also select longs and shorts based on secular themes. They remain cognizant of timing, sizing, and volatility risks when shorting stocks, therefore using a broad array of small positions, which lifts the overall portfolio’s number of holdings to 250-350. Short exposure generally stands at 20%-30%, with the portfolio's net exposure to the market kept at 100%. The US-domiciled fund can short stocks directly, while the offshore vehicle uses derivatives. The portfolios are quite similar, though the offshore fund’s Article 8 SFDR-classification means that it excludes some stocks for sustainability reasons.

Although the managers have intentionally increased the concentration of the long-only sleeve a bit since mid-2021, it remains a well-diversified and benchmark-aware portfolio. The number of positions in the long-only sleeve of Luxembourg-domiciled JPM US Select Equity Plus fell to 106 from 137 per end of December 2023. The team sold smaller stakes and increased the active weights for some higher conviction positions, including Booz Allen Hamilton, for which the active bet versus the Morningstar US LM NR USD category index rose to roughly 170 basis points from around 70 basis points. As a result, the portfolio’s top-10 concentration increased by 8 percentage points to reach 40% by the end of December 2023. Nonetheless, active weights in the long-only leg typically don’t exceed 200 basis points, and the sleeve’s active share versus the Morningstar category index of 51% per December 2023 remains fairly conservative versus category peers. However, the addition of the 30/30 extension gives the portfolio a bit of extra spice.

While the US-domiciled vehicle invests in several defense companies like RTX and Northrop Grumman, companies that generate more than 10% of their revenue from the production of conventional weapons are excluded from the investable universe for the Luxembourg-domiciled vehicle and cannot be shorted either. While the managers built up positions in Starbucks and Nike to benefit from the reopening of the Chinese economy, disappointment about the country’s economic growth and company-specific concerns made the managers decide to reverse their positions and hold short positions in both. The managers hold long positions in most stocks making up the “Magnificent Seven,” but Tesla has never been part of the portfolio, while Apple is a strong underweighting. Instead, the managers prefer other players within these companies’ value chains, such as diversified energy management company Eaton or smartphone supplier Qorvo.

Rated on Published on

An effective partnership of two experienced stock-pickers and a strong supporting cast earn the strategy a People Pillar rating of Above Average.

Director Jeffrey Schumacher

Jeffrey Schumacher

Director

People

Above Average

Susan Bao is an experienced and long-tenured manager on this strategy and is well-versed in the firm’s hallmark investment process. She joined J.P. Morgan in 1997 and started managing money in 2001 on the firm’s long-only strategy, JPMorgan US Equity, where she ran a 50% sleeve with her mentor Tom Luddy. When Luddy stepped down from his portfolio manager roles at the end of 2017, Bao retained a 10% sleeve in the long-only fund until it abandoned its multisleeve approach in 2020. Bao and Luddy have also managed this 130/30 strategy together since the start of the US-domiciled vehicle in 2005 and since 2007 on its offshore counterpart. Bao has a good grasp of the companies she’s investing in and those that she considers to be interesting candidates to sell short. In addition to this strategy, Bao also manages a more concentrated long-only version that’s run as a separate mandate since 2008.

Steven Lee succeeded Luddy in the partnership in 2018. Lee brings three decades of investment experience, most of which was gained as an analyst. Since 2014, he has managed JPMorgan Research Market Neutral, the firm's long-short strategy, which serves as the blueprint for this strategy’s 30/30 extension. Although portfolio management is collegial, Bao concentrates on consumer, financials, and healthcare, while Lee is the lead for industrial/commodities, technology, and utilities/telecom. Their collaboration so far has proved fruitful, and the managers have demonstrated their ability to generate alpha from both long and short ideas provided by the analyst team. This sector analyst team encompasses more than 20 career analysts and boasts roughly 20 years of industry experience on average. Despite regular personnel turnover, it remains a key success factor and gives the strategy impressive firepower to conduct fundamental research.

Rated on Published on

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

Associate Director Emory Zink

Emory Zink

Associate Director

Parent

Above Average

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.

Rated on Published on

The strategy has performed well under Susan Bao’s watch.

Director Jeffrey Schumacher

Jeffrey Schumacher

Director

Performance

Both the US-and Luxembourg-domiciled funds rank comfortably in the top-quartile of their respective Morningstar Categories over the trailing three, five, 10, and 15 years ended December 2023. With the departure of Tom Luddy and the arrival of long-short specialist Steven Lee, the strategy’s record since 2018 is more relevant. Encouragingly, thanks to effective stock selection, the vehicles have been able to generate a positive alpha versus the Morningstar US LM NR USD category index over various time horizons. Stock-picking was exceptionally strong during the coronavirus pandemic period, both in the long leg of the portfolio and in the 30/30 extension. In 2020, the security selection within semiconductors and hardware proved to be very effective, but also within financials, the team’s stock picks added value. On the stock level, the overweight positions in PayPal, Amazon.com, and Morgan Stanley boosted returns. In 2021, positions in semiconductors, banks, and energy drove performance. Diamondback Energy and Alphabet were key contributors in that year. The macro-influenced year of 2022 proved to be a more challenging period for the strategy. Positive sector allocation largely compensated for weaker stock-selection results. The managers experienced a blowout year in 2023, with the Luxembourg-domiciled fund's C acc USD class beating the category average by over 700 basis points and the category index by more than 500 basis points. Stock selection in both the long leg and the 30/30 extension meaningfully contributed, including Meta Platforms, Chipotle Mexican Grill, and Eaton.

Published on

It’s critical to evaluate expenses, as they come directly out of returns.

Director Jeffrey Schumacher

Jeffrey Schumacher

Director

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Bronze.

Published on

Portfolio Holdings JLPCX

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 40.1
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

Microsoft Corp

8.22 159.6 Mil
Technology

NVIDIA Corp

5.89 114.4 Mil
Technology

Amazon.com Inc

5.20 101.0 Mil
Consumer Cyclical

JPMorgan Prime Money Market Inst

4.61 89.6 Mil
Cash and Equivalents

Meta Platforms Inc Class A

4.13 80.3 Mil
Communication Services

Apple Inc

3.94 76.6 Mil
Technology

Mastercard Inc Class A

3.13 60.7 Mil
Financial Services

Alphabet Inc Class A

3.06 59.5 Mil
Communication Services

UnitedHealth Group Inc

2.37 45.9 Mil
Healthcare

Taiwan Semiconductor Manufacturing Co Ltd ADR

2.08 40.4 Mil
Technology