JPMorgan Equity Index A OGEAX

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

The strategy merits a High Process Pillar rating. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People, Process 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.

The profitability screen requires that the sum of a company’s generally accepted accounting principles earnings over the past four quarters be positive as well as the most recent quarter. The screen imparts a slight quality tilt to the portfolio but has a limited impact on the portfolio’s composition relative to other large-cap-focused benchmarks since many large-cap stocks tend to be profitable. But there have been instances where profitability prevented otherwise qualified companies from index inclusion. For example, Tesla TSLA was only added to the index after it passed the profitability screen in December 2020, despite passing the liquidity and market-cap thresholds in January 2013. Once the index committee selects stocks, it weights them by their market cap.

Market-cap weighting harnesses the market’s collective wisdom on stocks’ relative valuations and helps curb turnover and trading costs. The index committee further curbs turnover by implementing changes as it sees fit rather than adhering to a strict reconstitution schedule.

The fund directly holds constituents of the S&P 500 to best replicate the index’s performance. It does not hedge currency risks, which reduces its costs but adds exchange-rate risk.

This fund is better diversified than most of its peers. Its top 10 holdings represent 24% of the portfolio, much lower than the average fund in its category. However, the portfolio can become top-heavy during the market’s frenzied episodes. Over shorter time frames, investors’ enthusiasm for a particular stock or sector can make the portfolio top-heavy as it tilts toward recent winners. For example, the fund’s top 10 holdings ballooned to 30% of the portfolio in November 2021 before markets reversed in 2022.

The fund’s portfolio closely resembles its average category peer in both style and sector allocations. Capturing the same opportunity set as its active peers emphasizes the effect of the fund’s low fee, giving it a durable advantage over the long run.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.

There are four managers listed on the fund: Michael Loeffler, Oliver Furby, Nicholas D'Eramo, Alex Hamilton. The team is well equipped, with an average of 15 years of portfolio management experience. Together, they manage a total of five strategies, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate. This group has had relatively low management turnover, providing a stable environment and continuity for the strategies.

Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

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 provided superior returns compared with peers, but subpar returns compared with the category benchmark. This share class outpaced its average peer by 1.7 percentage points annualized over a 10-year period. But despite the above-average returns, it trailed the category benchmark, Russell 1000 Index, by an annualized 21 basis points over the same period.

When adjusting for risk, this fund is not compelling. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index over the trailing 10-year period. This subpar risk-adjusted performance has not resulted in higher volatility, as measured by their standard deviation, which is close to the benchmark. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This fund is within the second-cheapest quintile of its Morningstar Category. Its competitive expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class can deliver positive alpha versus the lesser of its median category peer or the category benchmark, leading to its Morningstar Medalist Rating of Bronze.