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JPMorgan International Equity I VSIEX Fund Analysis

| Quantitative rating as of

Morningstar’s Analysis VSIEX

Quantitative rating as of .

The Morningstar Quantitative Rating for funds is analogous to the rating our analyst might assign to the fund if they covered it.

Our analysts assign Bronze ratings to strategies they’re confident will outperform a relevant index, or most peers, over a market cycle.

Summary

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An upgrade in its Process Pillar rating is the primary driver of JPMorgan International Equity I's upgrade to a Morningstar Quantitative Rating of Bronze from Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the second-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 a significant overweight position in quality exposure and an underweight in yield exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The strategy belongs to a strong asset-management firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a favorable lineup success ratio and overall attractive fees. Finally, the strategy's longest-tenured manager is experienced, but still gets an Average People Pillar rating.

Process

| Above Average |

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. JPMorgan International Equity Fund earns an Above Average Process Pillar rating.

This strategy skews toward larger, growthier companies than its average peer in the Foreign Large Blend Morningstar Category. Analyzing additional factors, this strategy has a defensive tilt owing to its exposure to high-quality stocks. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it endure downturns better than Morningstar Category peers. The strategy is also historically more exposed compared with Morningstar Category peers. The managers have also tended to overweight yield, shown by the portfolio's high exposure to dividends or buybacks. Higher-yielding stocks can increase income, but some dividend-payers also might cut their payouts when earnings fall. But when compared with category peers, the strategy historically has had less exposure. Additionally, the managers do not exhibit a tilt toward momentum-oriented stocks, those currently on a winning streak. The latest portfolio has about average exposure compared with others in the equity fund universe. Momentum is based on the premise that stocks that have recently outperformed will continue to, and those that have underperformed will stay behind. However, 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 is overweight in financial services by 2.6 percentage points in terms of assets compared with the average portfolio in the category, and its healthcare allocation is similar to the category. The sectors with low exposure compared to their category peers are consumer cyclical and real estate, with consumer cyclical underweighting the average portfolio by 3.1 percentage points of assets and real estate similar to the average. The portfolio is composed of 78 holdings and is relatively top-heavy. Of the strategy's assets, 29.0% are concentrated within the top 10 holdings, as opposed to the typical peer's 14.9%.

People

| Average |

Despite its managers' lack of personal investment, JPMorgan International Equity Fund benefits from a market-tested longest-tenured manager. Together, this earns the team an Average People Pillar rating. Thomas Murray’s veteran status, with over 25 years of portfolio management experience, imprints a positive mark on the strategy as it brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.8 stars, demonstrating underwhelming risk-adjusted performance. Thomas Murray has an experienced backdrop of support. The three listed managers boast 22 years of average portfolio management experience. As a team, they manage seven investment vehicles together, with a Bronze asset-weighted average combined Morningstar Analyst and Quantitative Rating, demonstrating their potential to deliver positive alpha in aggregate. None of the managers here invests any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

Parent

| Above Average |

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.

Performance

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This strategy's Institutional share class has held up nicely, outlasting both its peers and the category benchmark. Over a 10-year period, this share class outperformed the category’s average return by 15 basis points annualized. And it was also ahead of the category index’s, MSCI ACWI ex USA Index's, gain by 37 basis points over the same period.

The risk-adjusted performance only continues to make a case for this fund. The share class had a higher Sharpe ratio, a measure of risk-adjusted return, than the index over the trailing 10-year period. These strong risk-adjusted results have not resulted in a bumpier ride for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself effective by generating positive alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

Price

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Because fees compound over time and diminish returns, it is critical for investors to minimize expenses. This share class lands in the second-cheapest quintile of its Morningstar Category. Its attractive fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha relative to its category benchmark, leading to its Morningstar Quantitative Rating of Bronze.