JPMorgan Small Cap Value Fund earns a High Process Pillar rating.
The largest contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 57%. 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 parent firm's impressive risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.2 stars, also contributes to the process. Strong risk-adjusted performance also supports the rating, as shown by 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.
This strategy targets smaller plays than its peers’ average in the Small Value Morningstar Category. But in terms of investment style, it is on par with peers. Looking at additional factor exposure, the managers have continually shown a willingness to take risks over the last few years, demonstrated by the portfolio's high volatility exposure. This contributes to a higher-risk, higher-reward approach. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, this strategy has demonstrated a preference for high-momentum stocks in these years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In this month, the strategy also had more exposure to the Momentum 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 real estate by 5.9 percentage points in terms of assets compared with the category average, and its financial services allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and consumer cyclical, underweight the average by 6.3 and 4.2 percentage points of assets, respectively. The portfolio is composed of 359 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 9.4% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category’s 25.7% average. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.