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 highest 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 low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. 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 primary contributor to the rating is the fund's strong 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 57% 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 respectable 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 leans toward larger, more growth-oriented companies compared with 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 demonstrated an overweight liquidity risk tilt, evidenced by holding companies with relatively lower trading volumes than peers in these years. 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. Similarly, in recent months, the strategy also had less exposure to the Liquidity factor than peers. Additionally, this strategy has exhibited a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. In recent months, the strategy also had less Volatility 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 3.0 percentage points in terms of assets compared with the category average, and its healthcare 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 portfolio is composed of 204 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 12.3% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 15.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 40% of the fund's holdings have changed, 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 manage is 3.8 stars, demonstrating above-average risk-adjusted performance. The team boasts an experienced corps of listed portfolio managers, with four others supporting Jonathan K.L. Simon. Together, they average 22 years of listed portfolio management experience. With at least one manager investing$ 1 million or more in this offering, investors can have some assurance that the team's interests are aligned with theirs.

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.

This share class led its average peer by an annualized excess return of 59 basis points over a nine-year period. And it also outperformed the category index, the Russell Midcap Index, by an annualized 17 basis points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing five-year period. This strategy had more-consistent returns, as denoted by a lower standard deviation, 19.7%, than the benchmark, 21.1%. However, the share class proved itself ineffective as it was unable to generate alpha, over the same five-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class is within the costliest quintile of its Morningstar Category. Its pricey fee, taken together with the fund’s People, Process, and Parent Pillars, suggests that this share class is unlikely to deliver positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Neutral.