JPMorgan Diversified C JDVCX

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

The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in the Europe-Developed region and the consumer cyclical sector compared with category peers. The strategy’s management team earns an Above 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 Diversified Fund earns an Above Average Process Pillar rating.

The primary contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Respectable risk-adjusted performance also influences the rating. 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 retain its portfolio managers.

This strategy maintains an equity allocation that hews closely to the typical Moderate Allocation peer but holds more assets in fixed income, with a 57% to 39% equity to fixed-income composition. Its equity sleeve maintains a persistent bias to growth stocks versus the category average. Although in terms of market-cap exposure, it is close to average. The strategy has three region or sector biases compared to category peers. The most notable is its consistent overexposure to the Developed Europe region. It also maintains an overweight bias toward the consumer cyclical sector. And finally, in the fund's most recent portfolio, less assets were allocated to developed markets regions. Although, this bias has not existed over time.

The portfolio has allocations in its top two sectors, consumer cyclical and energy, that are similar to the category. The sectors with low exposure compared to category peers are communication services and healthcare, underweight the average by 2.8 and 2.7 percentage points of assets, respectively. The portfolio is overweight in Developed Europe and Japan regions relative to the category average by 6.8 percentage points and 3.8 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Middle East and Africa, with North America underweight the average by 17.0 percentage points and Middle East and Africa similar to the average.

The team is backed by Jeffrey A. Geller, the longest-tenured manager on the strategy, who provides 23 years of listed portfolio management experience. Jeffrey A. Geller has an experienced backdrop of support. The three listed managers boast 17 years of average listed portfolio management experience. As a team, they manage three investment vehicles together, with solid long-term prospects. The strategies average a Bronze asset-weighted average Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. The management team is invested in the fund, but the maximum investment by any manager is between$ 500,000 and$ 1 million. An investment of more than$ 1 million would be ideal to align managers' interests with those of the fund'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.

It has provided similar returns compared with peers, but superior returns compared with the category benchmark. This share class mirrored the category average's 7.3% return over the eight-year period and its 6.2% return over a 10-year period. However it outperformed the category index, Morningstar Moderate Target-Risk Index, by an annualized 16 basis points over the same 10-year period.

When adjusting for risk, the fund is less favorable. The share class failed to beat the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. 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 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class levies a fee that ranks in its Morningstar Category's highest 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, leading to its Morningstar Medalist Rating of Bronze.