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JPMorgan International Equity A JSEAX

Medalist Rating as of | See JPMorgan Investment Hub
  • NAV / 1-Day Return 19.47  /  −0.76 %
  • Total Assets 4.4 Bil
  • Adj. Expense Ratio
    0.950%
  • Expense Ratio 0.950%
  • Distribution Fee Level Low
  • Share Class Type Front Load
  • Category Foreign Large Blend
  • Investment Style Large Blend
  • Min. Initial Investment 1,000
  • Status Open
  • TTM Yield 1.89%
  • Turnover 45%

USD | NAV as of Jun 21, 2024 | 1-Day Return as of Jun 21, 2024, 10:17 PM GMT+0

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Morningstar’s Analysis JSEAX

Medalist rating as of .

Reorganization Within J.P. Morgan's International-Equity Group Does Not Impact Ratings

Our research team assigns Silver ratings to strategies that they have a high conviction will outperform the relevant index, or most peers, over a market cycle on a risk-adjusted basis.

Reorganization Within J.P. Morgan's International-Equity Group Does Not Impact Ratings

null Andrew Daniels

Andrew Daniels

Analyst Note

J.P. Morgan announced that it is winding down the global sector specialist team within the international-equity group in May 2024. The global sector specialists combed through the vast array of ideas from J.P. Morgan's regional research teams and then worked with the portfolio managers to identify sector winners across countries. Of the eight members, four will remain with the firm in portfolio management roles, while the other four are leaving the firm.

According to the firm, the need for an additional research layer between the regional analysts and the portfolio managers eroded since Mark Ferguson assumed the global head of research role in 2020. Since then, the firm has adopted a global research framework used by all regional teams (instead of it differing across regions), while also investing heavily in its portfolio management technology platform, resulting in improved collaboration between portfolio managers and regional analysts.

Importantly, J.P. Morgan still boasts huge analytical resources based all around the world that contribute ideas to the international-equity strategies. And the solid London-based portfolio management team, which includes Tom Murray and Shane Duffy, remains in place. Therefore, the Above Average People ratings and Morningstar Medalist Ratings remain intact on JPMorgan International Equity, JPMorgan International Focus, and JPM International ADR.

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A standout option.

Associate Director Andrew Daniels

Andrew Daniels

Associate Director

Summary

JPMorgan International Equity is a standout non-US equity strategy because of its strong management team and robust investment approach.

This strategy is in the capable hands of Tom Murray. He became a comanager in 2004 and has been lead manager since September 2017. Murray is joined by comanagers Shane Duffy, James Sutton, and Zenah Shuhaiber, all of whom have been with JPMorgan for their entire investment careers. This is the same team that runs the ADR-only sibling offering JPMorgan International ADR, while Murray and Duffy co-lead the more concentrated, best-ideas offering, JPMorgan International Focus.

The managers make full use of JPMorgan's huge analytical resources to build a well-balanced portfolio. Supporting the managers are eight global sector specialists who scour the best ideas from the firm’s regional research teams that cover about 2,500 stocks globally. The global specialists ultimately rank prospective stocks from A to C, with A representing their highest-conviction bets, a framework that helps form position-sizing decisions in the end 70- to 100-stock portfolio. Management wants stock selection to drive returns, so it is cognizant to minimize unintended sector, country, and style-related bets relative to the MSCI EAFE prospectus benchmark. For example, while the managers are willing to pay up for some growth-oriented opportunities, valuation is an important consideration as well; this is why the end portfolios tend to land in the core portion of the Morningstar Style Box. Overall, management has married the firm’s in-house strengths with process traits to maximize the odds of success here, helping drive the Process rating to High from Above Average.

The strategy has posted respectable returns during Murray’s leadership. Since September 2017 through February 2024, the mutual fund’s institutional shares gained 4.9% annualized, beating the MSCI ACWI ex USA category index’s 4.0% return and 66% of its foreign large-blend Morningstar Category peers. Risk-adjusted returns told a similar story.

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Increased conviction in this strategy’s well-codified and robust approach drive its Process rating to High from Above Average.

Associate Director Andrew Daniels

Andrew Daniels

Associate Director

Process

High

The offering focuses on non-US firms that score well on balance sheet strength, profitability, and management quality. Idea generation relies on this team’s global sector specialists, who scour the best ideas from JPMorgan’s vast regional equity research teams—which cover approximately 2,500 stocks around the world—by viewing their research with a global lens. The global specialists ultimately rank stocks from A to C, with A representing their highest-conviction bets, a framework that helps form position-sizing decisions. The team is long-term-oriented—it sets five-year expected return targets—so it’s no surprise that annual portfolio turnover trends around 30%. While management is willing to pay up for some growth-oriented opportunities, valuation is an important consideration as well. As a result, the portfolio is well-balanced from a style perspective; this is why it landed in the core portion of the Morningstar Style Box.

The portfolio is composed of 70 to 100 stocks, with individual holdings capped at 5%. Management wants stock selection to drive returns, so sector weightings are generally held close to the MSCI EAFE prospectus benchmark, though country-relative weightings can diverge up to 15 percentage points. Up to 15% of portfolio assets can be invested in emerging markets but in practice hasn’t exceeded midsingle digits.

This strategy shares many traits with its more concentrated sibling, JPMorgan International Focus, but there are some differences. JPMorgan International Equity is benchmarked to the MSCI EAFE Index (which excludes emerging markets), but JPMorgan International Focus is benchmarked to the broader MSCI ACWI ex USA category index, which includes emerging markets. As of December 2023, JPMorgan International Equity’s 1% emerging-markets exposure was below JPMorgan International Focus’ 12% and the category index’s 19%. The MSCI EAFE Index also excludes Canada, so this strategy won’t own Canadian stocks, but they can be owned in JPMorgan International Focus.

JPMorgan International Equity's portfolio exposures reinforce that management is cognizant about balancing quality and valuation. Indeed, quality metrics like returns on invested capital have trended above the prospectus benchmark and the category index. At the same time, price multiples like price/earnings have typically been slightly higher than both core indexes over the years but well below their growth counterparts.

Japan has become a growing area of interest for the team, partially because of improving corporate governance. The team added at least nine Japanese holdings since mid-2022 (through December 2023), including tiremaker Bridgestone and conglomerate Hitachi. Japan was the portfolio’s largest absolute stake as of December 2023, at 22%, in line with the prospectus benchmark but well above the category index’s 14%.

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This strategy’s experienced leadership and strong supporting cast merit an Above Average People rating.

Associate Director Andrew Daniels

Andrew Daniels

Associate Director

People

Above Average

Tom Murray has been this strategy’s lead manager since September 2017, when longtime manager James Fisher retired. Murray has 27 years of investment experience, having spent his entire career with JPMorgan, and he’s been a comanager here since 2004. He’s supported by fellow comanagers Shane Duffy, James Sutton, and Zenah Shuhaiber, all of whom sit in London and have been with the firm for their entire careers. Duffy, who joined the firm in 1999, has been a comanager here since 2013 and currently leads the JPM International Growth strategy. Murray and Duffy have also co-led the concentrated sibling offering—JPMorgan International Focus—since its 2011 inception. Sutton and Shuhaiber are the newest additions here, coming aboard as comanagers in 2020 and 2022, respectively. Sutton joined JPMorgan in 2010 and was previously the team’s metals/mining specialist, while Shuhabier’s firm tenure dates back to 2005, having since managed global and European equity mandates.

The managers are supported by a stable group of eight global sector specialists, averaging 22 years of experience and 12 at JPMorgan. They scour the best ideas from the firm’s huge equity research resources—by viewing their regional research with a global lens—providing ample comfort around coverage breadth.

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A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

Associate Director Emory Zink

Emory Zink

Associate Director

Parent

Above Average

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.

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Tom Murray has led this strategy since September 2017.

Associate Director Andrew Daniels

Andrew Daniels

Associate Director

Performance

Since then, through February 2024, the mutual fund’s institutional shares gained 4.9% annualized, beating the MSCI ACWI ex USA category index’s 4.0% return and 66% of its foreign large-blend Morningstar Category peers. While volatility(as measured by standard deviation of returns) was slightly higher than the index, risk-adjusted returns told a similar story, with its Sharpe ratio of 0.24 beating the index’s 0.20 and 65% of peers.

While the offering is well balanced from a style perspective, it has had a slight growth signature. That helps explain why the strategy’s best years have tended to be when growth leads the way, such as in 2019 and 2020. Conversely, the offering struggled in 2022, when value held up much better than growth. The strategy fell 19.6% for the year, which was worse than the index’s 16.0% loss and 88% of peers. Poor stock selection in industrials was the primary culprit, such as distributor Ferguson and machinery maker SMC. But management stuck to its knitting, and the strategy bounced back nicely in 2023, a year when value again beat growth (outside the United States). The offering gained 17.9% in 2023, outpacing the index’s 15.6% gain and 69% of peers. The industrials sector was a key area of strength—including Swedish machinery firm Volvo AB and 2022 laggard Ferguson—as were materials and consumer discretionary.

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It’s critical to evaluate expenses, as they come directly out of returns.

Associate Director Andrew Daniels

Andrew Daniels

Associate Director

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Silver.

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Portfolio Holdings JSEAX

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 24.2
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

Shell PLC

3.23 138.2 Mil
Energy

ASML Holding NV

3.09 132.4 Mil
Technology

Novo Nordisk A/S Class B

2.97 127.1 Mil
Healthcare

Nestle SA

2.56 109.8 Mil
Consumer Defensive

AstraZeneca PLC

2.34 100.3 Mil
Healthcare

Lvmh Moet Hennessy Louis Vuitton SE

2.30 98.5 Mil
Consumer Cyclical

Tokio Marine Holdings Inc

2.02 86.5 Mil
Financial Services

3i Group Ord

1.94 83.1 Mil
Financial Services

BHP Group Ltd

1.91 81.6 Mil
Basic Materials

Hitachi Ltd

1.85 79.4 Mil
Industrials