JPMorgan Mid Cap Equity R2 JMCEX

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

The strategy’s management team earns an Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan Mid Cap Equity Fund earns an Above Average Process Pillar rating.

The leading factor in the rating is the fund's impressive long-term risk-adjusted performance. This can be seen in its 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 56% also influences the rating. 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 compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. 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 hold larger, higher-growth companies than its average peer in the Mid-Cap Blend Morningstar Category. Looking at additional factor exposure, this strategy has consistently favored low-quality stocks 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 displayed a tendency to hold more companies 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. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. Additionally, this strategy has tilted toward illiquid stocks during these years, evidenced by holding companies with relatively lower trading volumes than peers. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In recent months, the strategy also had less Liquidity factor exposure than 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 by 3.1 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 basic materials and industrials; however, the allocations are similar to the category. The strategy owns 201 securities and is less top-heavy than peers. Specifically, 12.7% of the strategy's assets are concentrated within the top 10 fund holdings, compared to the category average's 15.4%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 40% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Jonathan K.L. Simon, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.9 stars, indicating that their risk-adjusted returns outperformed the category average. The team is composed of a solid supporting cast of five additional named managers, averaging 13 years of listed portfolio management experience. The team has been a revolving door, with higher-than-average portfolio-manager turnover. The most recent documented departure was last month. High team turnover can hinder the effectiveness of a strategy's investment process.

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 outperformed the category’s average return by 69 basis points annualized. And it mirrored the performance of the category index, the Russell Midcap Index, over the same period.

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. Notably, these strong risk-adjusted results have not come with more volatility for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. 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 lands in the costliest quintile of its Morningstar Category. Its unattractive expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class is unlikely to deliver positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Neutral.