JPMorgan U.S. Applied Data Science Value earns an Above Average Process Pillar rating.
The most significant contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Strong risk-adjusted performance also contributes to 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 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, 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. Looking at additional factor exposure, 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. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. Given the high trading volume of holdings, this strategy has been exposed to liquid assets during these years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. Additionally, the managers have tended to overweight yield, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. 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 3.2 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 3.5 percentage points of assets and consumer defensive similar to the average. The strategy owns 104 securities and is less top-heavy than peers. Specifically, 20.9% of the strategy's assets are concentrated within the top 10 fund holdings, compared to the typical peer's 28.5%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 17% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.