JPMorgan Short Duration Bond I HLLVX

A sound investment process and strong management team underpin JPMorgan Short Duration Bond I's Morningstar Quantitative Rating of Silver. The portfolio maintains a sizable 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 an underweight position in corporate bonds and debt with over 30-year maturities compared with category peers. The management team's large personal investment in the strategy helps it earn an Above Average People Pillar rating. The strategy belongs to a strong asset-management firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a high lineup success ratio and overall reasonable fees.

Morningstar's style-agnostic investment process evaluation looks for strategies with a philosophy distinctive enough to generate standout results in the future. JPMorgan Short Duration Bond Fund earns an Above Average Process Pillar rating.

Compared with other funds in the Short-term Bond Morningstar Category, this fund consistently is sensitive to interest-rate changes. 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 displayed an underweight position on corporate bonds. Additionally, there's been a bias away from debt with longer than 30-year maturities. And finally, the fund leans toward AAA rated bonds.

This strategy has a modest 1.3% 12-month yield, lower than its average peer's 2.0%. It also has a 3.5% 30-day SEC yield (a measure similar to yield-to-maturity). A lower yield tends to indicate lower credit risk. Yet that's not the case here. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

JPMorgan Short Duration Bond Fund's sizable personal investments from managers and experienced team drives the strategy's Above Average People Pillar rating. Toby Maczka brings five years of portfolio management experience to the team. The average Morningstar Rating of the strategies they currently manage is 3.2 stars, demonstrating average risk-adjusted performance. Despite having a small team, the two listed managers boast 19 years of portfolio management experience. As a team, they manage two investment vehicles together, with a Silver asset-weighted average combined Morningstar Analyst and Quantitative Rating, demonstrating their potential to deliver positive alpha in aggregate. The highest personal investment in this offering by any of its managers is at least $1 million. We view an investment of this size positively, as it is large enough to help align managers' interests with those of the strategy'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.

In comparison with its peers and the category index, this strategy's Institutional share class has had a checkered long-term track record. This share class mirrored the category average's 0.9% return over the eight-year period and its 0.9% return over a 10-year period. This share class mirrored the Bloomberg Barclays U.S. Aggregate Government/Credit 1-3 Year Index's, category index's, 0.9% return over the eight-year period and its 0.9% gain over a 10-year period.

When adjusting for risk, the fund is not shown in a favorable light. 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.

By minimizing expenses, investors can maximize their expected returns. This share class sits in the cheapest quintile of its Morningstar Category. Its attractive fee, taken together with the fund’s People, Process, and Parent Pillars, results in a judgment that this share class has the ability to deliver positive alpha relative to its category benchmark, explaining its Morningstar Quantitative Rating of Silver.