JPMorgan Preferred and Inc Scrts R6 JPDRX

The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.

The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in A rated bonds and government bonds compared with category peers. The strategy’s management team earns an Above Average People Pillar rating. 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 Preferred and Inc Scrts Fd earns an Above Average Process Pillar rating.

The predominant contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 57%. 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. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also influences the rating. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

Compared with other funds in the Preferred Stock Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, the fund has exhibited a notable sector bias away from government bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to government bonds than peers. Finally, during the past few years, the fund leaned towards debt with longer than 30-year maturities. In this month, the strategy also leaned more towards debt with longer than 30-year maturities compared with its peers.

This strategy's 12-month yield is 5.4%, lower than its average peers' 5.9%. It also has a 5.6% 30-day SEC yield (a measure similar to yield-to-maturity). While a lower yield may deliver less income, it also tends to indicate lower credit risk. The portfolio has a higher average surveyed credit quality of BBB, compared with the typical peers' BB, and its non-investment-grade stake is 31% of assets, compared with its average peers' 30%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

Lisa Coleman, 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 3.3 stars, demonstrating average risk-adjusted performance. Lisa Coleman has an experienced backdrop of support. The three listed managers boast 17 years of average listed portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between$ 100,000 and$ 500,000. An investment of more than$ 1 million would be ideal to align managers' interests with those of the fund's investors.

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.

However, its track record is too short to draw a meaningful conclusion. In the past twelve months, the fund's Retirement share class has returned 5.9%, compared with the 6.8% return of the category benchmark, the ICE BofA Core Fixed Rate Preferred Securities Index, for the same period. But during that time, it outperformed the category average's 5.5% return for the period.

This share class lands in the cheapest quintile of its Morningstar Category. Its affordable fee, paired with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Bronze.