JPMorgan Small Cap Growth I OGGFX

A sound investment process and strong management team underpin JPMorgan Small Cap Growth I's Morningstar Quantitative Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.

The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and an overweight in volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The longest-tenured manager's extensive experience drives the strategy's Above Average People Pillar rating. The strategy belongs to a strong asset-management firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a favorable lineup success ratio and overall affordable fees.

Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains competitive advantage. JPMorgan Small Cap Growth Fund earns an Above Average Process Pillar rating.

This strategy does not differentiate itself from its Small Growth category peers in terms of size and style exposure. Analyzing additional factors, this strategy tilts toward low-quality stocks or the shares of companies with more financial leverage and lower profitability. These are not defensive holdings. The strategy is also historically less exposed to the factor compared with Morningstar Category peers. This strategy has also exhibited a tilt toward high-volatility stocks, meaning companies that have a higher historical standard deviation of returns. This factor's exposure tends to pay off most prominently when markets are hot. And compared with category peers, the strategy historically has had more exposure. Additionally, this strategy has exhibited a tilt toward liquid assets, evidenced by consistently holding companies with relatively higher trading volume. This lends the managers flexibility during bear markets to sell without adversely affecting prices. And the portfolio has more exposure than its Morningstar Category 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 healthcare and consumer cyclical relative to the average peer in its category by 4.5 and 3.1 percentage points in terms of assets, respectively. The sectors with low exposure compared to their category peers are financial services and basic materials, with financial services underweighting the average portfolio by 5.3 percentage points of assets and basic materials similar to the average. The portfolio is positioned across 126 holdings and is diversified among those holdings. In its most recent portfolio, 17.6% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category average's 25.6%. And finally, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

JPMorgan Small Cap Growth Fund's longest-tenured manager and seasoned portfolio managers support its Above Average People Pillar rating. Eytan M. Shapiro, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, demonstrating underwhelming risk-adjusted performance. Eytan M. Shapiro has an experienced listed co-manager. Together, they average 23 years of portfolio management experience. As a team, they manage two investment vehicles together, with a Silver asset-weighted average combined Morningstar Analyst and Quantitative Rating, demonstrating their potential to deliver positive alpha in aggregate.

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of 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.

Outpacing both its peers and the category benchmark, this strategy's Institutional share class, has had a noteworthy track record. Over a 10-year period, this share class outpaced the category's average return by 1.9 percentage points annualized. And it was also ahead of the category index’s, Russell 2000 Growth Index's, gain by 2.2 percentage points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class led the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. Often, higher returns are associated with more risk. However, this strategy hewed close to the benchmark's standard deviation. However, 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.

By minimizing expenses, investors can maximize their expected returns. This share class sits in the second-cheapest quintile of its Morningstar Category. Its affordable expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha versus its category benchmark, explaining its Morningstar Quantitative Rating of Silver.