JPMorgan Floating Rate Income C JPHCX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.

The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in corporate bonds and debt with three- to five-year maturities 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 Floating Rate Income Fund earns an Average Process Pillar rating.

The main driver of the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 55% also contributes to the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their respectable success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

Compared with other funds in the Bank Loan Morningstar Category, this fund has been consistently sensitive to interest-rate changes 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. Relative to the category average, the managers have been an overweight corporate debt in recent years. In the latest month, the strategy has relatively overweighted corporate bonds compared with its peers as well. Additionally, there's been an overallocation to debt with three- to five-year maturities over the past few years. Compared with category peers, the strategy had more exposure to debt with three- to five-year maturities in the most recent month. Finally, during the past few years, the fund leaned meaningfully towards BB rated bonds. In this month, the strategy also leaned more towards BB rated bonds compared with its peers.

This strategy has a modest 7.2% 12-month yield, lower than its average peers' 8.5%. It also has a 6.9% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Typically, a lower yield comes with the benefit of less credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated B.

The team is backed by James P. Shanahan, the longest-tenured manager on the strategy, who brings over 25 years of listed portfolio management experience. James P. Shanahan has an experienced backdrop of support. The three listed managers boast 16 years of average listed portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between$ 500,000 and$ 1 million. 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.

The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the category index over the trailing 10-year period. 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 period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This strategy has underperformed in absolute terms. The share class underperformed the category index by an annualized 2.2 percentage points over the past 10 years. The strategy also trailed the category average by an annualized 1.0 percentage points over the same 10-year period. Although one-year performance does not factor heavily in the overall rating, it is worth mentioning that this share class returned 10.2%, a sizable 1.9-percentage-point loss over its average peer, placing it within the bottom 10% of its category group.

It is good practice to weigh them heavily in any investment evaluation. This share class sits in the costliest quintile of its Morningstar Category. Its pricey expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class is unlikely to deliver positive alpha versus its category benchmark, explaining its Morningstar Medalist Rating of Neutral.