JPMorgan Diversified Fund earns an Above Average Process Pillar rating.
The predominant contributor to the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Respectable risk-adjusted performance also contributes to the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. 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 produces a fixed-income weighting that hews closely to the typical Moderate Allocation peer but holds more assets in equities, with a 34% to 63% fixed-income to equity composition. Its equity sleeve has been persistently biased to growth stocks versus the category average. Although in terms of market-cap exposure, it resembles most peers. The strategy has three region or sector biases compared to category peers. The most significant is a tilt to the Developed Europe region, where the strategy is consistently overweight. It also routinely positions more assets in the consumer cyclical sector. And finally, in the fund's most recent portfolio, less assets were allocated to developed markets regions. Although, this bias has not existed over time.
The portfolio is overweight in consumer cyclical by 2.7 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and healthcare, underweight the average by 3.0 and 2.7 percentage points of assets, respectively. The portfolio is overweight in Developed Europe and Developed Asia regions relative to the category average by 8.8 percentage points and 3.3 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Middle East and Africa, with North America underweight the average by 18.2 percentage points and Middle East and Africa
similar to the average.