JPMorgan Large Cap Value Fund earns an Above Average Process Pillar rating.
The primary contributor to 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. Respectable risk-adjusted performance also bolsters 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, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.
This strategy prefers smaller market-cap firms compared with the average fund in its peer group, the Large Value Morningstar Category. But in terms of investment style, it is on par with peers. Examining additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in 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. 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, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. 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 industrials by 3.3 percentage points in terms of assets compared with the category average, and its energy allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and healthcare, underweight the average by 3.5 and 3.4 percentage points of assets, respectively. The portfolio has 99 holdings and invests 27.0% of assets in its top 10 holdings, similar to the category average. And finally, in terms of portfolio turnover, this portfolio's holdings turn over more often than comparable products in its peer group, possibly resulting in higher costs for investors and a drag on performance.