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JPMorgan Global Allocation I GAOSX

Analyst rating as of

Morningstar’s Analysis

Analyst rating as of .

Uniquely attuned to the movements of global markets.

Our analysts assign Silver ratings to strategies that they have high conviction will outperform a relevant index, or most peers, over a market cycle.

Uniquely attuned to the movements of global markets.

Senior Analyst

Summary

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JPMorgan Global Allocation's go-anywhere approach isn't for the faint of heart, but it has rewarded investors' patience. Four cheaper share classes are worthy of a renewed Morningstar Analyst Rating of Silver, while the A, C, R2, and R3 share classes get Bronze.

Lead manager Jeff Geller, who also serves as CIO of J.P. Morgan's U.S. multi-asset group, tunes this fund's allocations to the firm's market views. Geller has the flexibility to take stock or bond exposure anywhere from 10% to 90% of the portfolio with one constraint: The fund must keep at least 40% of assets in foreign securities. Rapid-fire allocation shifts give this fund a volatile profile, but Geller keeps a lid on risk by managing volatility to a 60% MSCI World/40% Bloomberg Barclays Global Bond Index.

With few long-term strategic allocations, tactical allocation signals drive most of this fund's returns, and Geller won't hesitate to put his foot on the gas. Most dramatically, Geller has at different points ramped up international government bonds to 50% of the portfolio and sold them short by more than 10%. Derivatives allow the fund to stay nimble in rapidly changing market environments like the second quarter of 2020, when the fund dialed up equity risk by almost 10 percentage points.

Two new faces, Michael Feser and Philip Camporeale, joined Geller on the portfolio management roster in November 2020. Both have 20-plus years of experience with J.P. Morgan and bring significant fixed-income expertise to the table. Besides the other named managers, J.P. Morgan's seasoned multi-asset group supports Geller through an established tactical process that's been in use since 1999 and boasts an impressive record: Tactical signals have added value in 15 of the past 21 calendar years.

This fund has had rocky periods when tactical signals misfire, including 2018 and 2019, but delivers over the long haul. The fund's I share class boasts returns that outpaced the Morningstar Global Allocation Index and the world allocation Morningstar Category since inception through May 2021.

Process

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JPMorgan Global Allocation manifests the multi-asset group's highest-conviction ideas with battle-hardened precision, earning an Above Average Process rating.

Free from asset-allocation constraints beyond a minimum 40% international allocation, lead manager Jeff Geller maintains a focused approach by lifting investment ideas straight from the firm's excellent tactical-allocation process. Other J.P. Morgan strategies rely on strategic allocations or manager selection to boost returns, since the margins from successful tactical allocation are razor-thin. Meanwhile, Geller has balanced on the knife’s edge by juggling active bets across four different asset classes, 11 subasset classes, and four currencies, often using options and futures to express views. To keep risk in check, the team also aims to keep volatility comparable to a blended 60% MSCI World Index/40% Barclays Global Bond Index bogy.

J.P. Morgan runs one of the longest-standing tactical processes of any allocation group, dating back to 1999. Quantitative models, which consider valuations, fundamentals, risk factors, and technicals, inform the positioning. A group of senior strategists then discusses the quantitative output and incorporates qualitative, forward-looking views on growth, interest rates, earnings, and inflation to establish the team's tactical outlook.

People

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Jeff Geller, CIO of J.P. Morgan's multi-asset solutions team in the United States, has two new recruits to assist as he searches the globe for allocation ideas. J.P. Morgan's multi-asset team, now more than 100-strong, supports the strategy. Geller's skill, experience and vast resources merit a renewed Above Average People rating.

Geller has had firm control of this fund's reins since its May 2011 inception and continues to provide stability and expertise as two new comanagers stepped aboard in November 2020. While both Michael Feser and Philip Camporeale are still settling into their respective roles, that hasn't stopped the pair from hitting the ground running, providing fresh perspectives that have already shaped portfolio positioning in fixed income. Both managers are 20-plus year veterans of J.P. Morgan: Feser came up through J.P. Morgan's fixed-income group and spent time in the same quantitative group as comanager Grace Koo, while Camporeale had served as this fund's investment specialist since 2011. Eric Bernbaum rounds out the portfolio management lineup, contributing implementation and manager selection expertise.

Fourteen named J.P. Morgan managers run the portfolio's 15 underlying sleeves. Standouts include the recently added China A-shares team and Jonathan Simon of Bronze-rated JPMorgan Value Advantage JVASX.

Parent

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J.P. Morgan Asset Management’s strong investment culture, which shows through its long-tenured, well-aligned portfolio managers and deep analytical resources, supports a renewed Above Average Parent rating.

Across asset classes and regions, the firm's diverse lineup features many Morningstar Medalists, such as its highly regarded U.S. equity income strategy that’s available globally. There's been some turnover in the multi-asset team recently, but it remains deeply resourced and experienced. Manager retention and tenure rates, and degree of alignment for U.S. mutual funds compare favorably among the competition. Managers' compensation emphasizes fund ownership over stock ownership, which is distinctive for a public company.

The firm continues to streamline its lineup and integrate its resources further. For instance, in late 2019, the multi-asset solutions division combined with the passive capabilities. The firm hasn’t launched trendy offerings as it’s mostly expanded its passive business lately, but acquisition-related redundancies and more hazardous launches in the past weigh on its success ratio, which measures the percentage of funds that have both survived and outperformed peers. Fees are regularly reviewed downward globally; they're relatively cheaper in the U.S. than abroad. Also, the firm is building its ESG capabilities and supports distinctive initiatives on diversity.

Price

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It’s critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category’s cheapest quintile. Based on our assessment of the fund’s People, Process and Parent pillars in the context of these fees, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver.

Performance

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Strong results over long time horizons usually come with bouts of shorter-term underperformance. This fund's returns rise and fall with the success of J.P. Morgan's tactical calls, which makes for a bumpier ride. Even so, the fund has demonstrated a consistency not often exhibited by other highly tactical strategies, which can often suffer periods of sustained underperformance when high-conviction bets don't pay off. Geller has never posted a rolling three-year return lower than that of the typical peer.

From the fund's May 2011 inception through May 2021, the institutional share class generated 7.6% annualized, smashing the typical peer's 4.6% gain and beating the index's 7.3% return. Unsurprisingly, the fund's risk was higher over that stretch. For example, during the coronavirus drawdown of March 2020, investors experienced a bruising 15% loss, 1.5 percentage points higher than the category index. (Since inception, the fund's standard deviation exceeds the world-allocation category's average by about 0.4 percentage points annualized.) Yet over long stretches, investors have been compensated for that volatility, and the fund matches its category index's risk-adjusted results, coming out 0.3 percentage points ahead of its category.

Portfolio

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Lead manager Jeff Geller's tactical moves orbit around a core of stocks, bonds, and alternatives managed in 15 separate sleeves by J.P. Morgan managers. Geller uses options to tweak allocations in the short term, adjusting the weightings between managers more gradually if needed based on the team's 12- to 18-month tactical investment outlook.

Geller will not hesitate to make the most of his fund's flexibility in turbulent markets. He leapt into action in late February 2020 as markets started to draw down, ramping up the allocation to high-quality government bonds to an eye-popping 21 percentage points from the market peak on Feb. 18 to March 15 before shifting some of that stake into investment-grade bonds. As inflation fears picked up in early 2021, the team rapidly downshifted duration by a year, positioning the fund to add 1.3 percentage points of value relative to the government-bond slice of the Bloomberg Barclays Global Aggregate Index.

The team's current outlook favors the U.S. stock market, leading to an overweight of roughly 7 percentage points relative to the world-allocation category according to J.P. Morgan data. While the fund doesn't have dedicated strategic allocations, Geller’s soft spot for extended credit--which has taken up more than 30% of the portfolio at times--drives an allocation to high-yield bonds that's 8 percentage points greater than the median peer's.