JPMorgan Small Cap Blend C VSCCX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.

The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and momentum exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The management team's considerable industry experience earns it 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 Blend Fund earns a High Process Pillar rating.

The main contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's impressive risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also bolsters the rating. The parent firm's five-year risk-adjusted success ratio of 55% contributes to the process. 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. Their compelling success ratio suggests that this firm does well for investors and that this fund may benefit from that.

This strategy has tended to hold more growth stocks than others in the Small Blend Morningstar Category. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Looking at additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. Similarly, in recent months, the strategy also had less exposure to the Momentum 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. 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 technology by 4.0 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and industrials; however, the allocations are similar to the category. The portfolio is positioned across 246 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 11.2% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 25.8%. 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, provides strong guidance, offering over 25 years of listed portfolio management experience. Despite having a small team, the two listed managers boast over 30 years of listed portfolio management experience. The highest personal investment in this offering by any of its managers is at least$ 1 million. An investment of that size is large enough to align managers' interests with investors.

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.

The share class outstripped the category index, Russell 2000 Index, with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. These strong risk-adjusted results have not resulted in a bumpier ride for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

However, the fund's long-term absolute return track record is more convincing. This share class surpassed the category index over the past 10-year period, outperforming by an annualized 2.8 percentage points. It has also come out ahead of peers by an annualized 1.7 percentage points, over the same 10-year period.

This share class imposes a fee that places it in its Morningstar Category's highest quintile. Even with this fee, the fund’s People, Process, and Parent Pillars build confidence that this share class should be able to generate positive alpha versus its category benchmark, earning it a Morningstar Medalist Rating of Silver.