JPMorgan Developed International ValueR2 JPVZX

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

The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and an overweight in volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The management team's large personal investment in the strategy helps it earn an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Developed International Val Fd earns a High Process Pillar rating.

The main contributor to the rating is the fund's excellent long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 57% also supports 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 relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, influences the rating as well.

This strategy skews toward smaller, more value-oriented companies compared with its average peer in the Foreign Large Value Morningstar Category. 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. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent 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 financial services and energy relative to the category average by 10.3 and 2.9 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer defensive, underweight the average by 6.7 and 5.6 percentage points of assets, respectively. The strategy owns 232 securities and is quite concentrated. Specifically, 18.1% of the fund’s assets are housed within the top 10 holdings, versus the category average of 13.9%. And finally, in terms of portfolio turnover, on a year-over-year basis, 34% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

The leading driver of the rating is its parent firm's five-year success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The combined average five-year excess return of each manager also contributes to the rating. It implies that the funds they manage have exceeded the average manager.

The team is backed by Michael Barakos, the longest-tenured manager on the strategy, who brings over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, reflecting average risk-adjusted performance relative to category peers. Michael Barakos is supported by an experienced team, being able to draw on three additional listed managers, who average 17 years of listed portfolio management experience. The team has successfully retained portfolio-manager talent, providing continuity for strategies as long-term stability tends to support positive results. There have been no documented departures within the past five years.

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.

It has been strong over the short term but weak over the long term. Over the past five years, the fund beat the category index, the MSCI ACWI ex USA Value Index, by 1.2 percentage points, and surpassed the category's average return by 28 basis points. More importantly, on a 10-year basis, this share class fell behind the index by an annualized 68 basis points.

The share class failed to beat the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. However, this strategy stayed in line with the benchmark's standard deviation.

This share class levies a fee that ranks in its Morningstar Category's highest quintile. Even with this fee, the fund’s People, Process, and Parent Pillars indicate this share class can produce positive alpha relative to its category benchmark, leading to its Morningstar Medalist Rating of Silver.