JPMorgan SmartRetirement® Income R5 JSIIX

On Nov. 1, 2023, J.P. Morgan added Anshul Mohan to the portfolio manager roster of its SmartRetirement target-date series, including this one. Mohan, who will focus on the day-to-day management of the series, has comanaged J.P. Morgan Investor Balanced OGIAX, which earns an Above Average People rating, since 2016. In that role he helps with asset allocation and manager selection, and he has worked closely with Ove Fladberg, the lead manager of that fund and a comanager of the firm’s target-date series since 2022. Mohan’s addition does not affect this series’ Above Average People rating. Mohan joined J.P. Morgan in 2010 and served in various investment-related roles for its private bank and investment bank before joining the asset-management arm.

A well-resourced team and substantial retirement research bolster the case for the JPMorgan SmartRetirement target-date series, despite recent stumbles on the tactical-allocation front.

Veterans such as lead manager Dan Oldroyd guide this effort. He served as deputy to former lead skipper Anne Lester from 2010 through May 2020. Lester's departure was a significant blow, and there has been other turnover as well. However, Oldroyd is still backed by experienced personnel in the primary areas of focus—retirement research, tactical allocation, and manager selection. The team also brought in Ove Fladberg, a veteran portfolio manager on the multi-asset team, to assist its efforts. Michael Conrath, who led the firm's 529 plan group for more than a decade, took over as chief retirement strategist after his predecessor left for another firm.

Retirement research has been a major focus for the team. It uses participant data from Chase Bank as well as the Employee Benefit Research Institute to help formulate its glide path. That led to the development of its SmartSpending program, woven into this series in 2021-22. The firm devised SmartSpending to help investors fund discretionary spending throughout retirement by orbiting around the long-term risk profile of a blended index that's 40% MSCI ACWI and 60% Bloomberg U.S. Aggregate Bond. The program is geared for the investor to sell off shares of the investment annually. This approach requires active involvement from retirement plan participants to draw down their savings—not a given in the set-it-and-forget-it world of target-date funds—but the team cut its teeth researching the behavior of plan participants, and we remain confident that it can execute.

The team also had a previous history of making savvy tactical-allocation calls. However, the team's calls detracted value in the market volatility of 2018, 2019, 2021, 2022, and the first half of 2023. At times the series has missed out on equity rebounds by being too conservative—that was the case in the first three quarters of 2023, for example. But it was also overweight stocks coming into 2022, which hurt in the early stages of that year's bear market. The team hasn’t necessarily lost its ability to make correct calls—it added value in 2020's up-and-down market—but these issues bear watching.

However, we're less confident in the team's tactical-allocation approach. The series earns a Process rating of Above Average.

The incorporation of SmartSpending into the glide path marked the most significant adjustment to this series since its 2006 inception, but the team has a history of thoughtful changes. Such adjustments are rooted in the pioneering participant research the team has conducted all along. The team's crucial partnerships with outside parties such as Chase retail bank have spurred insights into participant behavior, including its finding that retirees' spending is most volatile during the early years and tapers off later on. The target-date franchise adapted its post-retirement allocations to account for this insight in 2021-22, aiming to fund investors' withdrawals until age 100.

The team also had a long history of making savvy tactical-allocation calls. However, the team's calls detracted value in the market volatility of 2018, 2019, 2021, 2022, and the first half of 2023. At times the series has missed out on equity rebounds by being too conservative, as in the first half of 2023. But it was also overweight stocks coming into 2022, which hurt in the early stages of the bear market. The team hasn't necessarily lost its ability to make correct calls—it added value in 2020’s up-and-down market—but these issues bear watching.

This series' glide path looks a bit different than the industry average. In 2021, lead manager Dan Oldroyd found that suppressed wage growth and increased spending rates had depressed retirement savings, which led him to boost strategic equity exposure by 3 percentage points to 94% of assets for young investors. The glide path’s landing point also rose by 7.5 percentage points to 40% in stocks, modestly flattening the glide path overall. As a result, the series is overweight equities compared with its typical peer from inception until 10 years before retirement, by as much as 5 percentage points. But at retirement, it's underweight stocks by 4 percentage points. Because the weighting then stays at 40%, the series is once again a bit heavier in equity by 10 years after retirement.

The team seeks to add additional value through careful manager selection and an established tactical-allocation process. With about $138 billion in assets, the target-date franchise isn't as nimble now, which could limit the team’s ability to implement its tactical views. The team has lately focused almost entirely on asset-class shifts, eschewing sector-based and regional tilts.

The team uses roughly 20 underlying strategies in the SmartRetirement series, including three small-cap stock portfolios and three emerging-markets equity funds because the team wants to smooth returns in volatile areas.

It earns an Above Average People Pillar rating.

Dan Oldroyd took the reins of the team in mid-2020 when longtime lead manager Anne Lester retired. Lester drove much of the team's research agenda, and SmartSpending was her creation. Oldroyd had served as Lester's comanager nearly since the series' 2006 launch and drove the integration of SmartSpending into the series' glide path after her departure. And he has veterans to rely on for retirement research, tactical-allocation calls, and manager selection.

The team has seen key departures. In addition to Lester, two portfolio managers, Michael Schoenhaut and Eric Bernbaum, moved to the firm's target-risk group in 2019, and Katherine Roy, a key contributor within the retirement research group, left in 2022 to join another firm. That said, Ove Fladberg, a veteran of the firm's target-risk group, joined as a portfolio manager in 2022, and Michael Conrath, previously the head of the firm's 529 plan group, joined the team in February 2023 to fill Roy's role.

Oldroyd and comanager Silvia Trillo also reap the benefits of J.P. Morgan's standout multi-asset solutions group, which numbers more than 100, and J.P. Morgan's wide array of building blocks. (The team can choose from more than 100 mutual funds and exchange-traded funds.) Fairly strong funds fill the resulting lineup: As of September 2023, 17 of the 21 earned higher-conviction Morningstar Medalist Ratings.

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

Over the 15-year period through August 2023, all but one vintage of the I share class surpassed their respective Morningstar Category peer group medians and category indexes on total return and Sharpe ratio (a measure of risk-adjusted return). However, the series' record is roughly average over most shorter periods.

Tactical calls are difficult to get right on a consistent basis, and even the sharpest allocators suffer bouts of underperformance. J.P. Morgan is no exception, and its tactical signals struggled throughout 2018, 2019, 2021, 2022, and the first half of 2023. Over the trailing five years, the series’ total returns trailed, on average, more than 60% of the peer group.

Over longer periods, attribution from J.P. Morgan shows tactical decisions have essentially been neutral—they detracted an average of 0.05 percentage points of return annually over the past decade through June 2023, and detracted an average of 0.04 percentage points dating back to the series' 2006 inception. Manager selection was also roughly neutral over those periods.

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 Bronze.