JPMorgan Income Builder assumes unique risks to meet its aim of generating income, but lead manager Michael Schoenhaut is more than up to the task. His battle-hardened process, honed since this series' founding in 2007, carries this its two cheapest share classes to a Morningstar Analyst Rating of Bronze, while its two pricier share classes remain at Neutral.
Meaningful allocation moves contribute to this fund's distinctive profile. Schoenhaut and comanager Eric Bernbaum will dial exposures up or down by more than 10 percentage points based on a highly institutionalized process developed at J.P. Morgan. To generate income, high-yield bonds have at times climbed to 50% of assets, so this fund behaves quite differently from the allocation--30 to 50% equity Morningstar Category and the Morningstar Moderately Conservative Target Risk category index. The fund also dabbles in higher-octane, less-traditional fare, like convertibles and bank loans, to boost yield.
Management taps many separate teams from across J.P. Morgan to run tailored mandates that seek securities that fit the team's yield and risk profiles. Portfolio manager turnover at this level has been high recently: Six have departed in the past four years. These disruptions strain Schoenhaut and Bernbaum’s resources, because they are responsible for hedging out underlying sector bets that don't align with their views. Encouragingly, the pair received a fresh infusion of support in from Gary Herbert, a recent addition to J.P. Morgan from Brandywine who was named to the portfolio roster in March 2021.
Supported by a historical record of deft positioning, this well-equipped team manages the risks of this fund’s flexible process with discipline. Over his tenure from June 2007 through February 2021, Schoenhaut delivered on the fund’s objective to keep volatility below that of a custom 60% MSCI World Index/40% Bloomberg Barclays U.S. Aggregate Bond Index benchmark. As a result, the fund's I share class sports risk-adjusted results that match its custom benchmark. The fund has also consistently averaged more than 4% in yield over that time.