JPMorgan Small Cap Equity’s proven and stable team applies a methodical approach centered on quality. The fund's four cheapest share classes earn a Morningstar Medalist Rating of Silver, while the four more expensive ones earn Bronze.
Managers Don San Jose and Dan Percella lead a small but capable team of three analysts. San Jose started on the strategy as an analyst in 2004 before becoming a comanager in 2007 and then taking over lead responsibilities in 2013. Percella has been by his side for much of that time, being on the small-cap team since 2008 and getting promoted to comanager in 2014. In addition to their core group of five, they also occasionally collaborate with other J.P. Morgan Asset Management analysts. Overall, San Jose, Percella, and their team have proved their worth over the years with strong stock picks, producing stellar risk-adjusted returns at this strategy.
The team’s consistent investment approach is key to this success. It focuses on companies operating in narrow niches that can leverage their competitive positioning to protect and grow their returns on capital at rates higher than the market foresees. These traits, along with a preference for earnings and free cash flow over top-line revenue growth, lead them to steadier business models. The focus of their approach also helps the relatively small team navigate the expansive small-cap universe.
This approach has produced stellar results. Since San Jose was appointed comanager in November 2007 through May 2023, the institutional shares’ 8.9% annualized return beat the fund's Russell 2000 Index prospectus benchmark by 2.3 percentage points. The fund’s outperformance has been consistent, but it particularly shines when markets decline, including during last year’s pullback.
After being closed to new investors for nearly six years, the strategy reopened in October 2022. The team has shown prudent capacity management in the past, not being afraid to close after surges of inflows. While the strategy is still fairly large for a small-cap fund (roughly $7.5 billion in assets as of March 2023), it has performed well at even higher levels in the past.