JPMorgan Diversified R6 JDVZX

The portfolio maintains a cost advantage over competitors, priced within the least expensive 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 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 largest 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. Noteworthy risk-adjusted performance also supports 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 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 has been persistently biased to growth stocks compared with the category average. Although in terms of market-cap exposure, it moves close to the rest of the pack. The strategy has three region or sector biases compared to category peers. The most noteworthy bias is a consistent overweight in 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.

Over the past three years, it beat the category index, the Morningstar Moderate Target-Risk Index, by an annualized 1.3 percentage points, and outperformed the category average by 20 basis points. And more importantly, when looking across a longer horizon, the strategy outpaced the index. On a five-year basis, it outperformed the index by an annualized 1.9 percentage points.

The risk-adjusted performance only continues to make a case for this fund. The share class led the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing five-year period. Often, higher returns are associated with more risk. However, this strategy stayed in line with the benchmark's standard deviation. Finally, the share class proved itself effective by generating positive alpha, over the same 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 is within the cheapest quintile of its Morningstar Category. Its competitive expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class can deliver positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Bronze.