JPMorgan Strategic Income Opports R5 JSORX

The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.

The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in AAA rated bonds and an underweight in debt with 20- to 30-year maturities compared with category peers. The strategy’s management team earns an Above Average People 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 driver of the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Excellent risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. 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 over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the average strategy in the category, the managers have been overweight AAA rated bonds in recent years. In the latest month, the strategy has relatively overweighted AAA rated bonds compared with its peers as well. Additionally, there's been a notable bias away from debt with 20- to 30-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with 20- to 30-year maturities than peers. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

This strategy's 12-month yield is 5.2%, which mirrors its average peer. In addition, its 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return) sits at 5.1%. The portfolio holds assets with a higher average surveyed credit quality of BBB, compared with the category average of BB, and 3% of the strategy's assets are rated non-investment-grade compared with its average peers' 25%. Strategies with lower credit risk can typically withstand market turmoil more effectively.

William H. Eigen, the longest-tenured manager on the strategy, boasts 23 years of listed portfolio management experience. William H. Eigen has an experienced backdrop of support. The three listed managers boast 20 years of average 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. 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.

Over a 10-year period, this share class outperformed the category’s average return by 76 basis points annualized. And it also exceeded the return of the category benchmark, the ICE BofA US 3 Month Deposit OR CM Index, by an annualized 98 basis points over the same period.

When adjusting for risk, the fund is not shown in a favorable light. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index 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, 2.3%, than the benchmark, 0.5%. However, the share class proved itself effective by generating positive alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class lands in the cheapest quintile of its Morningstar Category. Its low fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha against its category benchmark, leading to its Morningstar Medalist Rating of Silver.