JPMorgan Tax Aware Equity Fund earns an Above Average Process Pillar rating.
The most significant contributor to the rating is the firm's five-year retention rate of 83% over the period. The stability of the management team also bolsters 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, 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 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 is similar to the average. Examining additional factor exposure, 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 surpass peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also tilted toward low-volatility stocks in recent years, meaning those that have a lower standard deviation of returns. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts 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 portfolio is positioned across 44 holdings and is diversified among those holdings. In its most recent portfolio, 47.3% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 52.5%. And finally, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.