JPMorgan U.S. Applied Data Sci Val I JPIVX

JPMorgan U.S. Applied Data Sci Val I’s strong process and parent firm are the foundation for this strategy's Morningstar Quantitative Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest 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 overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. 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 reasonable fees. Finally, this strategy's limited portfolio manager turnover earns the team an Average People Pillar rating.

Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable execution is, and whether management maintains competitive advantage. JPMorgan U.S. Applied Data Science Value earns an Above Average Process Pillar rating.

This strategy targets smaller plays than its peers’ average in the Large Value Morningstar Category. But in terms of style (value/growth) exposure, the strategy does not differ much. Looking at additional factor exposure, this strategy holds some stocks with low trading volume. Illiquid stocks tend to be more difficult and costly to sell quickly during market stress, which could affect returns if rapid redemptions, for example, force managers to sell at disadvantageous prices. However, compared with Morningstar Category peers historically, the strategy is more exposed to the factor. This strategy has also tilted toward low-volatility stocks, meaning those that have a lower standard deviation of returns. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. But when compared with category peers, the strategy has historically had more exposure. Additionally, this strategy's holdings include more companies with high dividend or buyback yields. Stocks with high yield exposure tend to be more mature, stable businesses, though some offer high yields because their earnings and share prices have plunged. Extreme business or market conditions also can cause either kind of company to suspend or cut their payouts. And the portfolio has more exposure than its Morningstar Category peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.

The portfolio has allocations in its top 2 sectors, industrials and healthcare, that are similar to the average portfolio in the category. The sectors with low exposure compared to their category peers are technology and consumer defensive, with technology underweighting the average portfolio by 4.1 percentage points of assets and consumer defensive similar to the average. The strategy owns 97 securities and is diversified among those holdings. In its most recent portfolio, 23.4% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 32.2%. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

JPMorgan U.S. Applied Data Science Value doesn't differentiate itself much with standard team turnover and a corps of managers with average experience. This warrants an Average People Pillar rating. The team is backed by Wonseok Choi, the longest-tenured manager on the strategy, who provides 17 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, demonstrating, in aggregate, that they provide middling value for investors. Wonseok Choi draws on only two other listed supporting managers. Although, together they are adequately equipped, with seven years of average portfolio management experience. The team has not run into any turnover issues, with similar management retention to peers. However, the most recent documented departure was 16 months ago.

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 Institutional share class has generated inconsistent performance, with mixed long-term performance compared with peers and the category benchmark. Over the trailing eight-year period, this share class underperformed the category's average return by an annualized 15 basis points. But when expanded to a 10-year period, it outperformed the average by 57 basis points. It also failed to separate itself from the category index, Russell 1000 Value Index, where it underperformed the index by 21 basis points over an eight-year period and performed similarly to the category index's 11.0% gain over a 10-year period.

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. But notably, these subpar risk-adjusted results have not come with a rockier ride for investors. This strategy took on similar risk as the benchmark, as measured by 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.

It is critical to assess expenses, as they come directly out of returns. This share class lands in the cheapest quintile of its Morningstar Category. Its affordable fee, taken together with the fund’s People, Process, and Parent Pillars, suggests that this share class has the ability to deliver positive alpha against its category benchmark, explaining its Morningstar Quantitative Rating of Bronze.