JPMorgan Small Cap Growth Fund earns an Above Average Process Pillar rating.
The leading factor in 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 3.3 stars, also supports the process. 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 is similar to its Small Growth category peers in terms of market-cap and style exposure. Analyzing additional factors, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided 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. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This contributes to a higher-risk, higher-reward approach. 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 and consumer cyclical relative to the category average by 3.2 and 3.2 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and communication services, with financial services underweighting the average portfolio by 5.3 percentage points of assets and communication services similar to the average. The strategy owns 131 securities and is less top-heavy than peers. Specifically, 16.1% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the category’s 27.5% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 33% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.