JPMorgan U.S. Applied Data Sci Val I JPIVX

The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.

The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in volatility exposure and liquidity exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan U.S. Applied Data Science Value earns an Above Average Process Pillar rating.

The most significant contributor to the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Strong risk-adjusted performance also strengthens the process. This can be seen in 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. However, the process is limited by the parent firm's five-year retention rate of 80%, which suggests it could do more to hold onto its portfolio managers.

This strategy prefers smaller market-cap firms compared with the average fund in its peer group, the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Examining additional factor exposure, the managers have continually shown a willingness to take risks over the last few years, demonstrated by the portfolio's high volatility exposure. Such exposure tends to pay off when markets are hot and to be costly when they are not. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. Given the high trading volume of holdings, this strategy has been exposed to liquid assets during these years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. Additionally, this strategy has demonstrated a preference for high-momentum stocks in these years. Momentum is based on the premise that stocks that have recently outperformed will continue to outperform, and those that have underperformed will stay behind. Nevertheless, the fund's Momentum exposure was in line with peers in the latest month. 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 industrials by 3.1 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 technology and consumer defensive; however, the allocations are similar to the category. The strategy owns 103 securities and its assets are more dispersed than peers in the category. In particular, 20.3% of the portfolio's assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 29.7%. And in closing, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.

The team is backed by Wonseok Choi, the longest-tenured manager on the strategy, who brings 18 years of listed portfolio management experience. Wonseok Choi draws on two other listed supporting managers. Together, they have nine years of average listed portfolio management experience. The highest personal investment in the fund by any of its managers is between$ 100,000 and$ 500,000. That's on the low side--it would need to be more than$ 1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

Over a 10-year period, this share class' 8.8% gain mirrored the category's average return. However, it had an inconsistent track record compared with its category benchmark, Russell 1000 Value Index, where it outshone the category benchmark by 1.4 percentage points annualized over an eight-year period and done similarly to the category index over the 10-year period.

When adjusting for risk, the fund is not shown in a favorable light. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. This subpar risk-adjusted performance has not resulted in higher volatility, as measured by their standard deviation, which is close to the benchmark. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Thus, assessing cost is a critical step in any investment evaluation. This share class sits in the cheapest quintile of its Morningstar Category. Its competitive expense ratio, paired with the fund’s People, Process, and Parent Pillars, indicates that this share class is well-positioned to generate positive alpha against its category benchmark, explaining its Morningstar Medalist Rating of Bronze.