JPMorgan U.S. Applied Data Sci Val I JPIVX

The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.

The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in volatility exposure and liquidity exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The strategy’s management team earns an 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 U.S. Applied Data Science Value earns an Above Average Process Pillar rating.

The most important driver of the rating is the parent firm's five-year risk-adjusted success ratio of 56%. 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. Excellent risk-adjusted performance also supports 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 the number of months that the management team has been running this vehicle together.

This strategy, over time, has opted for smaller market-cap companies, compared with others in the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it is similar. Analyzing additional factors, this strategy has consistently overweighted the volatility factor compared with Morningstar Category peers over the last few years, meaning it invests in stocks with a history of the higher standard deviation of returns. This is a higher-risk, higher-reward approach. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt towards more high-liquid assets over peers in recent years, evidenced by consistently holding companies with relatively higher trading volumes. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. 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 industrials by 2.8 percentage points in terms of assets compared with the category average, and its real estate allocation is similar to the category. The sectors with low exposure compared to category peers are technology and consumer defensive, with technology underweighting the average portfolio by 2.8 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 104 holdings and is less top-heavy than peers. Specifically, 21.2% of the strategy's assets are concentrated within the top 10 fund holdings, compared to the category’s 27.4% average. And finally, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

Wonseok Choi, the longest-tenured manager on the strategy, boasts 18 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, reflecting average risk-adjusted performance in comparison to category peers. The team is small but adequately equipped, with two other supporting listed managers. Together, the three boast nine years of average listed portfolio management experience. The management team is invested in the fund, but the maximum investment by any manager is between$ 100,000 and$ 500,000. 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.

Over a 10-year period, this share class outperformed the category’s average return by 27 basis points annualized. And it mirrored the performance of the category index, the Russell 1000 Value Index, over the same period.

When adjusting for risk, the fund is less favorable. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index over the trailing 10-year period. But notably, these subpar risk-adjusted results have not come with more volatility than the benchmark, as measured by standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class is within the cheapest quintile of its Morningstar Category. Its low expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class has high potential to deliver positive alpha versus its category benchmark, leading to its Morningstar Medalist Rating of Bronze.