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JPMorgan Total Return R5 JMTRX

Medalist Rating as of | See JPMorgan Investment Hub
  • NAV / 1-Day Return 8.81  /  −0.23 %
  • Total Assets 165.0 Mil
  • Adj. Expense Ratio
    0.460%
  • Expense Ratio 0.460%
  • Distribution Fee Level Above Average
  • Share Class Type Retirement, Large
  • Category Intermediate Core-Plus Bond
  • Credit Quality / Interest Rate Sensitivity Medium/Moderate
  • Min. Initial Investment
  • Status Open
  • TTM Yield 3.69%
  • Effective Duration 5.45 years

USD | NAV as of Jul 19, 2024 | 1-Day Return as of Jul 19, 2024, 10:14 PM GMT+0

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Morningstar’s Analysis JMTRX

Medalist rating as of .

This core-plus offering hasn't realized its potential.

Our research team assigns Neutral ratings to strategies they’re not confident will outperform a relevant index, or most peers, over a market cycle on a risk-adjusted basis.

This core-plus offering hasn't realized its potential.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Summary

JPMorgan Total Return's flexible approach to this benchmark-aware core-plus mandate draws on this team’s unconstrained bond investing experience, but execution has not met expectations.

This lean investment team is led by fixed-income veteran Bill Eigen, whose history managing flexible mandates spans beyond his J.P. Morgan tenure that began in 2008. He draws on the support of longtime managers Jarred Sherman and Jeff Wheeler, who lead the fund’s investment-grade credit and securitized sleeves, respectively. A macro strategist, trader, and research analyst round out the group, and while the vast resources of J.P. Morgan's global fixed-income, currency, and commodities platform are at their disposal, they are only used sparingly. While this close-knit team collaborates on idea generation, Eigen has the final say on portfolio decisions, which introduces some key-person risk.

The framework combines the foundational attributes of traditional core bonds with opportunistic allocations. Three risk buckets serve to guide these exposures; core represents a traditional high-quality intermediate mandate, while opportunistic allocations range from high yield and structured mortgage-backed securities to relative value long-short strategies and other uncorrelated plays. While specific guardrails around these allocations are not defined, core makes up the lion's share of assets (about 91% as of September 2023). However, the fund's early days saw more than 30% of assets in opportunistic stakes, primarily high yield. Overall, void of compelling opportunities to invest in riskier sectors, the fund more closely resembles the risk profile of the Bloomberg U.S. Aggregate Bond Index.

This flexible approach fits with Eigen's contrarian style and desire to be nimble as market conditions change. However, his reluctance to enter riskier markets, even when spreads appear compelling, has caused the strategy's performance to lag core-plus rivals in recent years. High-yield corporate bonds, the fund's biggest risk lever, stood near its all-time low at 1.9% of assets as of September 2023. The fund continues to eschew risk and favor liquidity as investment-grade corporates, agency MBS, Treasuries, and cash made up more than 91% of assets.

This risk aversion has dented its long-term performance versus peers that held higher stakes in riskier debt. Over the past 10 years, the I shares' 1.8% annualized return ended December 2023 trailed its unique intermediate core-plus bond Morningstar Category median peer's 2.1%, ranking in the bottom quintile. Relative returns over the past three- and five-year periods were similar.

Rated on Published on

This fund's unconstrained approach within a benchmark-aware framework helps differentiate it from peers, but the use of its broader toolkit has n't been consistent, supporting an Average Process rating.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Process

Average

Noted contrarian Bill Eigen combines the foundational attributes of traditional core bonds with opportunistic allocations. The process segregates allocations into three risk buckets: 1) core, which serves as the traditional high-quality intermediate bond allocation, 2) extended sectors, which include long positions like high yield and structured credit, and 3) alternatives, which include uncorrelated trades like relative value (long-short) plays or in niche markets.

Guidelines around these specific buckets are fluid and can indicate Eigen's prevailing stance on risk. In the fund's early days, it had more than 30% of assets in the opportunistic allocation (extended and alternatives), while this stake was less than 10% as of September 2023, where it has remained for the past three years. Void of compelling opportunities to invest in riskier sectors, the fund more closely resembles the risk profile of the Bloomberg U.S. Aggregate Bond Index. In periods of elevated volatility, the team is able to invest generously in these opportunistic areas, buying when others are selling, though in practice it hasn't made as much use of this leeway as one could expect. The fund generally shies away from Treasuries in favor of higher-yielding bonds and has dabbled in niche markets, including credit risk transfer securities, insurance-linked bonds, and credit derivatives like CDX or ABX. Eigen's view is that predicting rates is challenging, so duration generally stays near that of the index.

Manager Bill Eigen can pull more levers than most peers, but he has exhibited more caution toward these more adventurous fixed-income sectors in recent years.

High-yield corporate bonds, the fund's biggest risk lever and largest historical driver of excess returns, have been a mere footnote in recent years. This stake, which stood near its all-time low at 1.9% of assets in September 2023, hasn't been meaningful since it made up about 13% in 2018, and down from its high of about 25% in 2015. At the same time, peers have broadly held more in sub-investment-grade paper than this strategy; the average core-plus peer's 11.8% of assets in below-investment-grade fare was higher than this fund's 5.8%.

Eigen isn't swayed by the market's consensus views and is open to risk when it presents an attractive opportunity. Even amid seemingly compelling high-yield valuations in 2020, he opted to add to investment-grade credit instead of junk-rated paper amid caution around corporate fundamentals. This investment-grade corporate stake stood at 43% of assets, down 6 percentage points from a year prior and nearly 13.5 percentage points from mid-2021. For a fund that tends to shy away from low-yielding Treasuries, this allocation rose to 14.7% of assets as of September 2023 from about 10% a year before, in addition to higher cash stakes. Agency MBS, mostly in pass-throughs, made up about 26.8% of the fund's assets. Duration, a measure of interest-rate risk, has moved roughly in tandem with the index; the fund's 5.7-year duration was slightly shorter than the year prior and nearly a half year short of the index's 6.2 years.

Rated on Published on

Sole manager Bill Eigen leads a small, yet experienced team of bond specialists and can tap J.P. Morgan's broader fixed-income resources to earn an Average People rating.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

People

Average

Eigen brought his opportunistic fixed-income style and pedigree in managing benchmark-agnostic mandates to J.P. Morgan in 2008 when he helped launch the nontraditional bond fund JPMorgan Strategic Income Opportunities JSOSX. Eigen previously led Highbridge Capital Management's fixed-income group and spent 12 years at Fidelity Investments, where he comanaged several multisector portfolios. He remains the head of the six-person, Boston-based absolute return and opportunistic fixed-income team.

This team sits outside of J.P. Morgan's larger global fixed-income, currency, and commodities, or GFICC, platform and features two supporting managers, a macro strategist, one assistant trader, and one research analyst. Managers Jarred Sherman and Jeff Wheeler are also key decision-makers; they are not named on this fund but comanage its flagship JPMorgan Strategic Income Opportunities. Sherman, an investment-grade credit specialist, brings over 24 years of experience, while Wheeler, who has over 26 years' experience, is responsible for the securitized assets selection. Moreover, while this team can draw on GFICC's resources, it does so only sparingly, mainly drawing on its Indianapolis-based high-yield team.

This small, close-knit group's process is less formal than those of larger managers, and while each member of the team helps to foster and vet ideas, final decisions fall to Eigen. Team stability over the past few years is encouraging after higher turnover between 2017 and 2019, although a research associate left in 2022. Moreover, Eigen's strong personality and final decision-making authority introduce some key-person risk here.

Rated on Published on

Building on a solid foundation, J.P. Morgan Asset Management maintains an Above Average Parent rating.

Associate Director Alyssa Stankiewicz

Alyssa Stankiewicz

Associate Director

Parent

Above Average

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

Rated on Published on

The strong performance from the fund's early years is a distant memory, and while performance since inception is better than the average core-plus peer, recent years have not been as impressive.

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Performance

Over the past 10 years, the I shares' 1.8% annualized return ended December 2023 trailed its unique intermediate core-plus bond category median peer's 2.1%, ranking in the bottom quintile. And while it kept pace with its Bloomberg U.S. Aggregate Bond Index, investors should expect more given the fund's broad toolkit.

Bill Eigen's cautious view toward risk has hurt this fund that strives to deliver excess returns with lower-than-index volatility. Reluctance to add meaningfully to high-yield credit when spreads were especially wide has held it back and benefited peers that kept or added to these edgier companies. At the same time, the fund's overall volatility, as measured by standard deviation, was not meaningfully lower than peers despite the fund's tamer profile. Its 10-year standard deviation was slightly less than its median rival's, but its Sharpe ratio, a measure of return relative to volatility, was among the category's worst.

The fund's longer-term bias to spread products like corporate bonds and agency MBS over much of its life boosted returns during earlier risk-friendly periods, but the team has missed some recent opportunities. After 2020's coronavirus pandemic-driven high-yield selloff, Eigen's caution around corporate fundamentals led to higher stakes in investment-grade bonds rather than high yield as spreads blew out to multiyear wides. Last year was more of the same; the fund's yield underweighting versus peers caused its 5.4% gain to lag its typical core-plus rival's 6.4% return in 2023.

Published on

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

Senior Analyst Paul Olmsted

Paul Olmsted

Senior Analyst

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we don’t think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Neutral.

Published on

Portfolio Holdings JMTRX

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 20.5
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

JPMorgan Prime Money Market Inst

26.07 50.5 Mil
Cash and Equivalents

Federal National Mortgage Association 3%

4.34 8.4 Mil
Securitized

Federal National Mortgage Association 2.5%

4.17 8.1 Mil
Securitized

United States Treasury Bonds 4.5%

3.05 5.9 Mil
Government

United States Treasury Notes 4.75%

2.78 5.4 Mil
Government

Federal National Mortgage Association 3.5%

2.49 4.8 Mil
Securitized

Federal National Mortgage Association 4%

2.11 4.1 Mil
Securitized

United States Treasury Bonds 1.75%

1.63 3.2 Mil
Government

Federal National Mortgage Association 2.5%

1.46 2.8 Mil
Securitized

United States Treasury Bonds 1.125%

1.25 2.4 Mil
Government