JPMorgan Small Cap Blend R6 JSCHX

The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest 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 underweight position in quality exposure and momentum exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The management team's considerable industry experience earns it 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 Small Cap Blend Fund earns an Above Average Process Pillar rating.

The leading factor in the rating is the fund's impressive 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 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 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 has more exposure to the Growth factor than the Small Blend Morningstar Category average. But in terms of market capitalization, it is on par with peers. Analyzing additional factors, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could 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 taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This contributes to a higher-risk, higher-reward approach. In this month, the strategy also had more exposure to the Volatility 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 technology by 3.8 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and basic materials; however, the allocations are similar to the category. The strategy owns 244 securities and is less top-heavy than peers. Specifically, 10.8% of the portfolio's assets are concentrated within the top 10 fund holdings, compared to the category average's 23.9%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 37% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Eytan M. Shapiro, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.3 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Eytan M. Shapiro has an experienced listed co-manager. Together, they average over 30 years of listed portfolio management experience. The highest personal investment in this offering by any of its managers is at least$ 1 million. An investment of that size is large enough to align managers' interests with investors.

Note: The People Pillar rating is indirectly assigned by an analyst. At least one of the managers on this fund manages a different product rated by an analyst. The analyst-assigned People Pillar rating(s) for these managers are combined with algorithmic scores for any non-covered 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.

Narrowing in on the past three-year period, it beat the category index, the Russell 2000 Index, by an annualized 2.3 percentage points, and outperformed its average peer by 5.0 percentage points. And more importantly, when looking across a longer horizon, the strategy surpassed the index. On a five-year basis, it led the index by an annualized 2.4 percentage points.

The risk-adjusted performance only continues to make a case for this fund. The share class led the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing five-year period. This strategy had more-consistent returns, as denoted by a lower standard deviation, 21.6%, than the benchmark, 23.9%. However, the share class proved itself ineffective as it was unable to generate alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class is within the second-cheapest quintile of its Morningstar Category. Its competitive fee, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha versus its category benchmark, leading to its Morningstar Medalist Rating of Silver.