JPMorgan US Small Company’s largely quantitative approach is sensible, but tight constraints and several recent team changes limit this strategy’s appeal.
Industry veteran Phil Hart has led this strategy since 2010, but it is more of a group effort. Hart, along with comanagers Akash Gupta and Robert Ippolito, handles the fundamental efforts on this strategy, while Wonseok Choi heads the quant group. The four managers have all worked on J.P. Morgan’s US Structured Equity team for more than 15 years, but there have been several moving pieces around them. In September 2021, fundamental comanager Lindsey Houghton left J.P. Morgan after more than 15 years, while quant comanager Jonathan Tse left the strategy in May 2023, though he remains with the firm. The remaining team has the benefit of leaning on some of J.P Morgan’s broader resources, but the increased turnover is a concern.
The strategy combines quantitative and fundamental elements to try to outperform the Russell 2000 Index; it is sensible and repeatable but not very distinctive. It starts with a quantitative model that screens the Russell 2000 Index for stocks displaying the best combination of value, quality, and momentum characteristics. While it will look at some traditional metrics such as P/E for value, it also includes many advanced features such as natural language processing that analyzes earnings call transcripts for possible indications about quality and momentum. Ultimately, the model builds a diffuse portfolio of 350 to 500 stocks, which limits the strategy’s ability to stand out. Indeed, the fund's active share, a measure of portfolio differentiation from a benchmark, regularly ranks in the lowest decile of its actively managed small-blend Morningstar Category peers.
Since Hart took command of this strategy in November 2010 through July 2024, the institutional shares’ 11.1% annualized return was slightly ahead of the Russell 2000 Index’s 10.4%. A recent stretch of strong performance has boosted this record, however, as the strategy’s 5.0% annualized return over the trailing three years through July was 3.1 percentage points ahead of the index. In 2021 and 2022, the strategy’s value and quality tilts boosted performance, while more recently its momentum exposure has propelled performance.