JPMorgan SmartRetirement® Blend 2060 R6 JAAYX

A strong team and modest costs render the JPMorgan SmartRetirement Blend target date series attractive.

A team of veterans led by Dan Oldroyd guide this effort. He served as deputy to former lead Anne Lester from 2010 through May 2020. Lester’s departure was a significant blow, and two other managers have come off the series in recent years. However, Oldroyd is still backed by experienced personnel in the primary areas of focus: retirement research, tactical allocation, and manager selection. The team also brought in Ove Fladberg and Anshul Mohan, veteran portfolio managers on the multi-asset team, to assist its efforts in 2022 and 2023, respectively. Michael Conrath, who led the firm’s 529 plan group for more than a decade, took over as chief retirement strategist after his predecessor left for another firm.

This target-date series is built on strong retirement research. It uses participant data from Chase Bank as well as the Employee Benefit Research Institute to help formulate its glide path. That led to the development of its SmartSpending program, woven into this series in 2021-22. The firm devised SmartSpending to help investors fund discretionary spending throughout retirement by orbiting around the long-term risk profile of a blended 40%/60% MSCI All Country World Index/Bloomberg US Aggregate Bond Index. The program is geared for the investor to sell off shares of the investment annually. This approach requires active involvement from plan participants to draw down their savings—not a given in the set-it-and-forget-it world of target-date funds—but the team cut its teeth researching the behavior of plan participants, and we remain confident that it can execute.

The team also had a previous history of making savvy tactical allocation calls. However, the team's calls detracted value in much of the market volatility of 2018-22, and the first three quarters of 2023. At times the series has missed out on equity rebounds by being too conservative, as in the first three quarters of 2023, for example. But it was also overweight in stocks coming into 2022, which hurt in the early stages of that year's bear market. The team hasn’t necessarily lost its ability to make correct calls—it added value in 2020's up-and-down market—but these issues bear watching.

However, we’re less confident in the team’s tactical allocation approach. The series earns a Process rating of Above Average.

The incorporation of SmartSpending into the glide path marked the most significant adjustment to this series since its 2006 inception, but the team has a history of thoughtful changes. Such adjustments are rooted in the pioneering participant research the team has conducted all along. The team’s crucial partnerships with outside parties such as Chase retail bank have spurred insights into participant behavior, including its finding that retirees’ spending is most volatile during early years and tapers off later on. The target-date franchise adapted its post-retirement allocations to account for this insight in 2021-22, aiming to fund investors’ withdrawals until age 100.

The team had previously made a long string of well-timed tactical allocation calls. At times the series has been too conservative before equity rebounds, as in the first three quarters of 2023. But it was also overweight in non-U.S. equity in 2021 when such fare lagged and overweight in stocks coming into 2022’s bear market. The team did add value in 2020’s up-and-down market.

This series’ glide path diverges at numerous points from the industry norm. In 2021, lead manager Dan Oldroyd found that suppressed wage growth and increased spending rates had depressed retirement savings, which led him to boost strategic equity exposure by 3 percentage points to 94% of assets for young investors. The glide path’s landing point also rose by 7.5 percentage points to 40% in stocks, modestly flattening the glide path overall. As a result, the series is overweight in equities compared with its typical peer from inception until 10 years before retirement, by as much as 7 percentage points. But at retirement, it’s underweight in stocks by 4 percentage points. Because the weighting then stays at 40%, the series is once again a bit heavier in equity by 10 years after retirement.

The team seeks to add additional value through careful manager selection and an established tactical allocation process. With about $138 billion in assets, the target-date franchise isn’t as nimble now, which could limit the team’s ability to implement its tactical views. The team has lately focused almost entirely on asset-class shifts, eschewing sector-based and regional tilts.

The team uses 14 underlying strategies in this series (along with third-party exchange-traded funds on occasion on a shorter-term basis), most of them passive and cheap. Thus, it has less mandate overlap than the more-active SmartRetirement series, though this one does hold two emerging-markets equity portfolios and two high-yield strategies because the team wants to smooth returns in volatile areas.

It continues to earn an Above Average People Pillar rating.

Dan Oldroyd took over the team in mid-2020 when longtime lead manager Anne Lester retired. Lester drove much of the team’s research agenda, and SmartSpending was her creation. Oldroyd had served as Lester’s comanager nearly since the series’ 2006 launch and drove the integration of SmartSpending into the series’ glide path after her departure. And he has veterans to rely on with regard to retirement research, tactical allocation calls, and manager selection.

The team has seen key departures. In addition to Lester, two portfolio managers, Michael Schoenhaut and Eric Bernbaum, moved to the firm’s target-risk group in 2019, and Katherine Roy, a key contributor within the retirement research group, left in 2022 to join another firm. That said, Ove Fladberg and Anshul Mohan, veterans of the firm’s target-risk group, joined as portfolio managers in 2022 and 2023, respectively. Michael Conrath, previously the head of the firm’s 529 plan group, joined the team in February 2023 to fill Roy’s role.

Oldroyd and comanager Silvia Trillo also reap the benefits of J.P. Morgan’s standout multi-asset solutions group, numbering more than 100, and J.P. Morgan’s wide array of building blocks. (The team can choose from more than 100 mutual funds and ETFs.) Fairly strong strategies fill the resulting lineup: As of October 2023, 12 of the 14 underlying holdings earned Morningstar Medalist Ratings of Bronze or better.

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.

The series gained a slight edge on the risk-adjusted front: Seven of the nine vintages beat their average peer and Morningstar Category index on alpha during the period. However, returns are mixed over most shorter periods; the portfolios’ total returns trailed roughly 60% of category peers, on average, in the five years ended October 2023, and six of 10 beat both the category and index on a risk-adjusted basis. That's largely because the team's tactical allocation calls have hit an extended dry spell. Tactical calls are difficult to get right consistently, and even the sharpest allocators suffer bouts of underperformance. J.P. Morgan's tactical signals struggled for much of 2018-22 and the first half of 2023. They did add value in the up-and-down market of 2020.

Over longer periods, attribution data from J.P. Morgan shows tactical decisions have modestly detracted compared to an internal blended benchmark, despite a run of success before 2018. Manager selection was a slight positive during the period.

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Silver.