JPMorgan Small Cap Value Fund earns a High Process Pillar rating.
The most significant contributor to 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 outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also influences the rating. Strong risk-adjusted performance also supports the process, as shown by 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.
This strategy hews closely to the market cap and investment style of its Small Value category peers. Looking at additional factor exposure, this strategy has consistently overweighted the volatility factor compared with Morningstar Category peers over the last few years, meaning it invests in stocks with a history of the higher standard deviation of returns. 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 recent months, the strategy was more exposed to the Volatility 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 beat peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Given the high trading volume of holdings, this fund also holds highly liquid assets. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In this month, the strategy also had more exposure to the Liquidity 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 real estate and healthcare relative to the category average by 5.6 and 3.7 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and consumer cyclical, underweight the average by 5.2 and 4.8 percentage points of assets, respectively. The portfolio is composed of 371 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 9.1% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 28.1%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 79% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.