JPMorgan Diversified L JPDVX

JPMorgan Diversified L’s strong process and parent firm support this strategy's Morningstar Quantitative Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest 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 a significant overweight position in the Europe-Developed region and the consumer cyclical sector compared with category peers. The strategy is part of a first-rate parent, as shown by a favorable lineup success ratio and overall affordable fees. These attributes support its Above Average Parent Pillar rating. Finally, this management team has a wealth of experience, but still gets an Average People Pillar rating.

Morningstar's style-agnostic investment process evaluation looks for strategies with a philosophy distinctive enough to generate standout results in the future. JPMorgan Diversified Fund earns an Above Average Process Pillar rating.

This strategy maintains a fixed-income to equity allocation very similar to Allocation--50% to 70% Equity peers, with a 36.0% to 55.5% fixed-income to equity weighting. Looking exclusively at the portfolio's equity sleeve, the strategy is consistently tilted toward both smaller market-cap and growth-oriented companies compared with the category average. The strategy has three region or sector biases compared to category peers. The most significant portfolio tilt is to the Developed Europe region, where the strategy is typically overexposed. It also routinely positions more assets in the sector. And finally, the portfolio has sustained an underexposure to developed markets regions compared with peers.

The current portfolio has an average price/earnings multiple of 18.4 opposed to the typical category peer's 17.4. With this high markup, investors appear to be expecting significant above-market growth. The portfolio is overweight in consumer cyclical by 3.0 percentage points in terms of assets compared with the average portfolio in the category, and its financial services allocation is similar to the category. The sectors with low exposure compared to their category peers are communication services and consumer defensive; however, the allocations are similar to the average category portfolio. The portfolio is overweight in Developed Europe and Japan regions relative to the average peer in its category by 9.2% and 3.3% of assets, respectively. The regions with low exposure compared to their category peers are North America and Emerging Asia, with North America underweight the average portfolio by 13.2% of assets and Emerging Asia similar to the average.

Even with its managers' lack of personal investment, the team managing JPMorgan Diversified Fund stands out with a seasoned corps of managers. Taken together, the strategy earns an Average People Pillar rating. Jeffrey A. Geller, the longest-tenured manager on the strategy, provides strong guidance, bringing forward 22 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, demonstrating, in aggregate, that they do not provide value for investors. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 15 years of portfolio management experience. As a team, they manage three investment vehicles together, with an asset-weighted average Neutral combined Morningstar Analyst and Quantitative Rating. This means, in aggregate, the team falls short and will struggle to produce positive alpha. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of 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 strategy’s Retirement share class has held up nicely, outlasting both its peers and the category benchmark. Over a 10-year period, this share class outpaced the category's average return by 95 basis points annualized. And it also outperformed the category index's, Morningstar Moderate Target-Risk Index's, gain by an annualized 1.1 percentage points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. Often, higher returns are associated with more risk. However, this strategy hewed close to the benchmark's standard deviation. Finally, the share class proved itself effective by generating positive alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Returns vary from period to period, but expenses are always subtracted. It is good practice to weigh them heavily in any investment evaluation. This share class sits in the second-cheapest quintile of its Morningstar Category. Its attractive fee, paired with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha versus its category benchmark, explaining its Morningstar Quantitative Rating of Bronze.