JPMorgan Investor Balanced I OIBFX

An attentive team and reasonable resources are the foundation for this target-risk series—JP Morgan Investor Conservative Growth, JP Morgan Investor Balanced, JP Morgan Investor Growth & Income, and JP Morgan Growth—which should prove easy to hold but unlikely outperform long-term, driving an overall Morningstar Analyst Rating of Neutral.

Ove Fladberg leads this series as well as the nine-person Asset Management Solutions team from Columbus Ohio. Four portfolio managers with an average of more than a decade on the fund work with the rest of the team in clearly delineated roles. Together they assemble sensible collections of JP Morgan mutual funds into four target-risk portfolios with prudent risk/reward profiles.

As is common for target-risk portfolios, the process here follows three steps: long-term allocation, intermediate-term adjustments, and manager selection. Here those stages are straightforward and disciplined. The Columbus team uses information from the firm’s top experts across the globe but adds their own work to emphasize diversification, balance, and sound risk/reward tradeoffs.

The portfolios contain roughly 25 JP Morgan funds each. Fladberg’s emphasis on all-in-one portfolios with comfortable risk/reward ratios comes through clearly. Yet they’re not simply timid. Within generally cautious strategic asset allocation plans there are overweights to areas known more for adding return than avoiding risk—such as small-caps and high yield bonds. On balance, these positioning decisions generated a fairly typical return profile relative to peers over the trailing decade.

Over the course of Fladberg’s portfolio management tenure from Nov. 1, 2010, through July 31, 2022, there’s a mixed performance record. Conservative Growth lagged the Morningstar Moderately Conservative Target Risk Index but led the allocation 30% to 50% equity category average. Balanced was in line with both the Morningstar Moderate Target Risk Index and the typical allocation 50% to 70% equity peer, but the more equity-heavy Growth & Income handily topped the same index and peer average. Growth outgained both its Morningstar Target Risk Index and the average allocation 85%+ equity category peer by more than 100 basis points annualized.

The team here follows a straightforward, reasonable process to create portfolios that are easy to own but also fairly standard relative to those of peers, earning an Average Process Pillar rating.

The Asset Management Solutions (AMS) team uses three forecasts to help craft these funds. It starts with JP Morgan’s capital market assumptions, a 10- to 15-year forecast its experts in New York create. Then the Columbus-based team builds separate market cycle and business cycle forecasts that span three to five years.

Each January, the AMS team uses the three projections to adapt its allocation mix for the year. Its strategic allocations tend to be steady with muted and gradual tactical shifts. To fill the multi-asset funds with J.P. Morgan funds, AMS uses firm leader Robert White's Multi-Asset Manager Research work. These detailed reports on select firm strategies examine philosophy, process, people, and performance. AMS also adds its own statistical work to seek funds with desirable risk/reward tradeoffs (using Sharpe ratios) to diversify a portfolio and drive a good overall risk/reward balance for the Investor funds. They value uncorrelated excess returns and sometimes actively employ style offsets—in 2020 adding Small Cap Equity to offset Small Cap Value’s volatility, for instance.

At the asset mix level, the series shows signs of caution, but within asset classes the picture is more complex. Three of the four funds hold between 7% and 8% more cash and bonds than the average category peer (all description as of June 2022); Growth & Income is the exception (and a tough category fit). Within fixed income, however, the high yield bond weights range from a careful, below-peer average 12.6% for Conservative Growth to a bold above-peer average of 17.2% for Growth & Income. In equities, all four funds devote about 8% of assets to small-caps, which against category peers looks intrepid for Conservative Growth and comparatively defensive for Growth. All told, the funds’ compositions demonstrate active positioning that is neither guarded nor brash and aims at creating distinct, attractive risk/reward profiles across different investors’ tolerances.

As of mid-2022, 35 underlying funds (plus cash) comprised the investment menu for these portfolios. Each Investor fund employs most of these constituents--ranging from 24 to 27 funds. The Investor funds once held more constituents—about 40 in 2015—and still have a number of small weightings (the funds average four holdings with less than 1% of fund assets) whose impacts are limited. Of the 35 underlying funds, 11 are Morningstar Medalists and eight more receive Morningstar Quantitative Rating medals. Eleven more receive Neutral ratings.

A small, stable team conscientiously assembles core holdings that satisfy investors’ risk preferences, earning an Average People rating.

Lead manager Ove Fladberg heads the nine-member Asset Management Solutions team. Portfolio manager Anshul Mohan and analysts Luying Wei and Oliver Furby handle asset allocation and manager selection. Three more—portfolio managers Mike Loeffler and Nick D’Eramo as well as analyst Alex Hamilton—implement the portfolios. The team recently added Kapil Agrawal and Tian Xie. The four named portfolio managers average more than ten years in their roles on the fund, with three of them working together on this team for more than 15 years.

The AMS team gets substantial help from firm leadership: quantitative research head Katherine Santiago, qualitative chief John Bilton, and manager research specialist Robert White. The asset mix work from Santiago and Bilton fuels Columbus’s asset-allocation committee, which Fladberg runs monthly, to drive any tactical shifts. To fill the portfolios, White’s work helps Mohan run manager selection with his specialty in fixed income; Wei now leads equity manager selection here.

All told AMS runs nearly $100 billion in exchange-traded funds and multimanager portfolios, $17 billion of that in the Investor funds. That’s hefty weight, but manageable given the straightforward process.

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.

During Ove Fladberg’s tenure as a listed manager, from Nov. 1, 2010 through July 31, 2022, the annualized returns of the institutional share classes of Balanced, Growth & Income, and Growth all matched or topped their category indexes and peers. The Conservative Growth Fund’s return over that time lagged its bogy but beat its typical category peer. Asset mixes drive the results: compared to peers Conservative Growth typically has a low equity weight and Growth & Income tends to have a high one.

This group of funds has performed well in the last two down markets—the 2020 pandemic panic form February 19 to March 23 of 2020 and the first seven months of 2022. Conservative Growth, Balanced, and Growth all held up better than both their indexes and average peers. As noted, Growth & Income has a relatively high equity weight, so it has fallen in between its bogy and peers so far in 2022 and lagged both in 2022.

The AMS team prioritizes risk-adjusted performance (as measured by Sharpe ratios) ahead of other statistics. All four funds generated compelling Sharpe ratios relative to peer averages and indexes over Fladberg’s tenure. It’s worth noting that the Sharpe ratio advantages have been thin rather than dramatic over most periods.

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 second-cheapest quintile. Even so, based on our assessment of the fund’s People, Process and Parent pillars in the context of these fees, we don’t think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Neutral.