JPMorgan Small Cap Value A PSOAX

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 strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in volatility exposure and an underweight in quality exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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 Small Cap Value Fund earns a High Process Pillar rating.

The main driver of the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 54% also influences 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. The size of the portfolio management team supports the process as well. With four portfolio managers at the helm, the fund is reasonably well-resourced.

This strategy is similar to its Small Value category peers in terms of market-cap and style exposure. Analyzing additional factors, the managers have continually shown a willingness to take risks over the last few years, demonstrated by the portfolio's high volatility exposure. This contributes to a higher-risk, higher-reward approach. 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 surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy has exhibited a tilt toward liquid assets, evidenced by consistently holding companies with relatively higher trading volumes. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. 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 7.2 and 3.0 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and technology, underweight the average by 6.4 and 2.8 percentage points of assets, respectively. The strategy owns 409 securities and is diversified among those holdings. In its most recent portfolio, 7.9% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 28.4% average.

This share class’ quantitatively driven People Pillar content was not generated because of insufficient data. To generate individualized content, the Medalist Rating quantitative analysis requires sufficient data to generate its framework of “ mental models ” designed to mimic content written by analysts.

An algorithmically assigned People Pillar uses an algorithm designed to predict the People Pillar rating analysts would assign the investment product, if they covered it.

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.

It has been strong over the short term but disappointing over the long term. Over the past five years, the fund led the category index, the Russell 2000 Value Index, by 70 basis points, and trailed the category average by 74 basis points. More importantly, on a 10-year basis, this share class trailed the index by an annualized 68 basis points.

The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index over the trailing 10-year period. However, this strategy stayed in line with the benchmark's standard deviation.

This share class charges a fee that ranks in its Morningstar Category's second-costliest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars suggest this share class should be able to deliver positive alpha relative to its category benchmark, earning it a Morningstar Medalist Rating of Bronze.