JPMorgan Small Cap Blend A VSCOX

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

The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy's investment approach stands out and earns an Above Average Process Pillar rating. 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 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 an Above Average 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 five-year risk-adjusted success ratio of 57% also bolsters the rating. 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 impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

This strategy owns more growth stocks than its peers in the Small Blend Morningstar Category. But in terms of market capitalization, it is on par with peers. Analyzing additional factors, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has had lower exposure to momentum stocks over peers in recent years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. 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 3.8 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 basic materials; however, the allocations are similar to the category. The portfolio is composed of 244 holdings and its assets are more dispersed than peers in the category. In particular, 10.8% of the strategy's assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 23.9%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 37% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Eytan M. Shapiro, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.3 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Eytan M. Shapiro has an experienced listed co-manager. Together, they average 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 had a higher Sharpe ratio, a measure of risk-adjusted return, than the category index, Russell 2000 Index, over the trailing 10-year period. Often, higher returns are associated with more risk. However, this strategy hewed close to the benchmark's 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.

Fortunately, when looking at the fund's long-term absolute returns, it came out ahead. This share class surpassed the category index over the past 10-year period, outperforming by an annualized 2.3 percentage points. It has also come out ahead of peers by an annualized 1.7 percentage points, over the same 10-year period.

It is good practice to weigh them heavily in any investment evaluation. This share class imposes a fee that places it in its Morningstar Category's second-costliest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars suggest this share class can deliver positive alpha relative to its category benchmark, garnering a Morningstar Medalist Rating of Silver.