JPMorgan Tax Aware Equity Fund earns an Above Average Process Pillar rating.
The most important driver of the rating is the firm's five-year retention rate of 83% over the period. The stability of the management team also supports the rating. Specifically, the fund has not seen a manager change in the last 15 years. 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.
This strategy prefers more value-oriented stocks compared with the average fund in its peer group, the Large Growth Morningstar Category. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Analyzing additional factors, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects will rest on its ability to supersede peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. In this month, the strategy also had more exposure to the Yield factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.
The portfolio is overweight in energy and financial services relative to the category average by 4.2 and 4.2 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 8.9 and 5.0 percentage points of assets, respectively. The strategy owns 44 securities and its assets are more dispersed than peers in the category. In particular, 47.3% of the fund’s assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 52.5%. And in closing, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.