JPMorgan Small Cap Growth I OGGFX

The portfolio maintains a cost advantage over competitors, priced within the second-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 an overweight in liquidity exposure and an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The management team's large personal investment in the strategy helps it earn an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Small Cap Growth Fund earns an Above Average Process Pillar rating.

The largest contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 55% also bolsters the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the number of months that the management team has been running this vehicle together.

This strategy is similar to its Small Growth category peers in terms of market-cap and style exposure. Analyzing additional factors, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In recent months, the strategy was more exposed to the Liquidity 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. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility 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 technology by 5.4 percentage points in terms of assets compared with the category average, and its consumer cyclical allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and communication services, with financial services underweighting the average portfolio by 4.9 percentage points of assets and communication services similar to the average. The portfolio is composed of 136 holdings and is less top-heavy than peers. Specifically, 17.6% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the category average's 26.1%. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

Eytan M. Shapiro, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. Eytan M. Shapiro is supported by an experienced team, being able to draw on three additional listed managers, who average 19 years of listed portfolio management experience. As a team, they manage two investment vehicles together, with solid long-term prospects. The strategies average a Silver asset-weighted algorithmically-assigned average Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. With at least one manager investing$ 1 million or more in this offering, investors can have some assurance that the team's interests are aligned with theirs.

Note: The People Pillar rating is indirectly assigned by an analyst. At least one of the managers on this fund manages a different product rated by an analyst. The analyst-assigned People Pillar rating(s) for these managers are combined with algorithmic scores for any non-covered 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 challenged over the short term but successful over the long term. Over the past five years, the fund underperformed the category index, the Russell 2000 Growth Index, by 50 basis points, and underperformed the category average by 1.1 percentage points. More importantly, on a 10-year basis, this share class outperformed the index by an annualized 2.2 percentage points.

The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing 10-year period. However, these returns were accompanied by additional risk, with a standard deviation of 22.4% compared to the benchmark's 20.9%.

This share class is in the second-cheapest quintile of its Morningstar Category. Its low fee, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class can deliver positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Silver.