JPMorgan Small Cap Blend A VSCOX

A sound investment process and strong management team underpin JPMorgan Small Cap Blend A's Morningstar Quantitative Rating of Silver. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest quintile among peers.

The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and liquidity exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. The management team's considerable industry experience earns it an Above Average People Pillar rating. The strategy has a solid parent that earns an Above Average Parent Pillar rating. This firm has had a high lineup success ratio and overall attractive fees.

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

This strategy skews toward smaller, more undervalued companies than its average peer in the Small Growth Morningstar Category. Examining additional factor exposure, this strategy tilts toward low-quality stocks or the shares of companies with more financial leverage and lower profitability. These are not defensive holdings. The strategy is also historically less exposed to the factor compared with Morningstar Category peers. This strategy is also exposed to liquid stocks. More liquid assets lend themselves to more flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short time, it will be less likely to shoulder a significant loss. But when compared with category peers, the strategy historically has had less exposure. Additionally, this strategy leans toward low-yield stocks, holding fewer companies with high dividend or buyback yields. Most often, returning capital to shareholders is not a priority for businesses with low or no yields because they are reinvesting in their operations and plans. Such companies can pay off with strong returns should the selected companies deliver on growth projections, but they're also riskier. However, the portfolio has less 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 is overweight in financial services and real estate relative to the average peer in its category by 7.5 and 4.5 percentage points in terms of assets, respectively. The sectors with low exposure compared to their category peers are technology and healthcare, underweight the average by 8.2 and 7.2 percentage points of assets, respectively. The portfolio is positioned across 237 holdings and is diversified among those holdings. In its most recent portfolio, 10.2% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 26.5% average. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

JPMorgan Small Cap Blend Fund's experienced corps of managers and strong longest-tenured manager support its Above Average People Pillar rating. Eytan M. Shapiro, the longest-tenured manager on the strategy, boasts over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, demonstrating disappointing risk-adjusted performance. Eytan M. Shapiro has an experienced listed co-manager. Together, they average over 25 years of portfolio management experience.

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 A share class has lapped both its peers and the category benchmark. This share class outpaced its average peer by 2.6 percentage points annualized over a 10-year period. And it also beat the category index's, Russell 2000 Growth Index's, gain by an annualized 3.0 percentage points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class outstripped the index with a higher Sharpe ratio, a measure of risk-adjusted return, over the trailing 10-year period. Notably, these strong 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. However, 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.

Because fees compound over time and diminish returns, it is critical for investors to minimize expenses. This share class levies a fee that ranks in its Morningstar Category's second-costliest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars build confidence that this share class should be able to generate positive alpha versus its category benchmark, garnering a Morningstar Quantitative Rating of Silver.