JPMorgan Strategic Income Opports C JSOCX

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

The strategy’s management team earns an Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan Strategic Income Opports Fd earns an Above Average Process Pillar rating.

The main contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 59%. 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. The stability of talent across its parent firm also contributes to the process. The firm's asset-weighted manager tenure of 16 years demonstrates its ability to retain portfolio managers. 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.

Compared with other funds in the Nontraditional Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity. Opening the analysis to additional factors, the portfolio has displayed three biases over time, whether towards or away from certain fixed-income instruments. Compared with the average strategy in the category, the managers have been substantially underweight BB rated bonds. Additionally, there's been a notable bias away from debt with 20- to 30-year maturities. And finally, the fund leans meaningfully toward cash.

This strategy's 12-month yield is 3.9%, lower than its average peers' 4.8%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 4.3%. A lower yield tends to indicate lower credit risk. The portfolio has a higher average surveyed credit quality of BBB, compared with the typical peers' BB, and its non-investment-grade stake is 5% of assets, compared with its average peers' 23%. Strategies with lower credit risk can typically withstand market turmoil more effectively.

William H. Eigen, the longest-tenured manager on the strategy, boasts 22 years of portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.9 stars, demonstrating above-average risk-adjusted performance. William H. Eigen has an experienced backdrop of support. The three listed managers boast 19 years of average portfolio management experience. At least one member of the team has invested$ 1 million or more of their own capital in the fund, which helps align their interests with the strategy's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other 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.

It has been subpar over the short term but strong over the long term. Over the past five years, the fund trailed the category index, the ICE BofA US 3 Month Deposit OR CM Index, by 69 basis points, and equaled the category average. More importantly, on a 10-year basis, this share class performed in line with the index.

The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. In addition to its subpar risk-adjusted performance, the strategy also took on elevated risk, as measured by a higher standard deviation, 2.2%, than the benchmark, 0.4%.

Thus, assessing cost is a critical step in any investment evaluation. This share class levies a fee that places it in its Morningstar Category's second-costliest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars build confidence that this share class should be able to generate positive alpha versus its category benchmark, resulting in a Morningstar Medalist Rating of Bronze.