JPMorgan Corporate Bond R6 CBFVX Fund Analysis

A strong management team and sound investment process underpin JPMorgan Corporate Bond R6's Morningstar Quantitative Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.

The strategy's managers invest alongside shareholders, which helps it earn an Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. The portfolio has overweighted corporate bonds and has an underweight in BB rated bonds compared with category peers. The strategy has a solid parent that earns an Above Average Parent Pillar rating. This firm has had a competitive lineup success ratio and overall attractive fees.

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. JPMorgan Corporate Bond Fund earns an Above Average Process Pillar rating.

Compared with other funds in the Corporate Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity. Opening the analysis to additional factors, the portfolio, over time, has displayed three biases whether toward or away from certain fixed-income instruments. First, the managers have demonstrated an overweight position on corporate debt. Additionally, there's been a bias away from BB rated bonds. And finally, the fund leans toward debt with three- to five-year maturities.

This strategy has a 3.6% 12-month yield, higher than its average peer's 3.3%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 5.0%. While a higher yield may deliver more income, it also tends to indicate higher credit risk. However, that's not the case here. The portfolio has a higher average surveyed credit quality, BBB, compared with the typical peer's BB and 3% of the strategy's assets are rated non-investment grade compared with its average peers' 45%. Strategies with less credit risk may help to provide a reliable ballast during periods of equity market stress.

JPMorgan Corporate Bond Fund benefits from personal investments from managers and portfolio managers with a wealth of experience, warranting an Above Average People Pillar rating. Lisa Coleman’s veteran status, with over 25 years of portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 3.4 stars, demonstrating encouraging risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 17 years of portfolio management experience. 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.

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

This strategy’s Retirement share class' long-term performance is mixed depending on the yardstick used. It has provided similar returns compared with peers, but superior returns compared with the category benchmark. Over the past seven-year period, this share class outperformed the category's average return by an annualized 40 basis points. But if extended to a nine-year time period, it performed similarly to the average's 2.7%. But it was ahead of the category index, Bloomberg Barclays U.S. Corporate Bond Index, by an annualized 31 basis points over the same nine-year period.

When adjusting for risk, this fund is competitive. The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing five-year period. These strong risk-adjusted results have not come with a bumpier ride for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself effective by generating positive alpha, over the same five-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Fees are one of the most predictive factors of future performance. This share class is in the second-cheapest quintile of its Morningstar Category. Its attractive expense ratio, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class can deliver positive alpha against its category benchmark, leading to its Morningstar Quantitative Rating of Bronze.