JPMorgan Mid Cap Equity I VSNGX Fund Analysis

JPMorgan Mid Cap Equity I’s strong process and parent firm are the foundation for this strategy's Morningstar Quantitative Rating of Bronze. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.

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 is currently, although not consistently, overweight in momentum exposure and volatility exposure compared with category peers. Momentum is the premise that stocks that have recently outperformed will continue to do so. With low momentum exposure, the portfolio is holding stocks that managers believe to be undervalued. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy is part of a first-rate parent, as shown by a high lineup success ratio and overall reasonable fees. These attributes support its Above Average Parent Pillar rating. Finally, the strategy's longest-tenured manager is experienced, but still gets an Average People Pillar rating.

Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains competitive advantage. JPMorgan Mid Cap Equity Fund earns an Above Average Process Pillar rating.

This strategy tends to hold larger, more growth-oriented companies compared with its average peer in the Mid-Cap Blend Morningstar Category. Examining additional factor exposure, the managers do not tilt toward or away from high-momentum stocks; the current portfolio has about as much momentum exposure as other funds. Momentum investors count on recently outperforming stocks to continue to do so, and underperforming shares to keep disappointing. The managers do not tilt toward or away from the volatility factor; the current portfolio has about average exposure compared with others in the equity strategies universe. Additionally, the managers currently show no preference for or aversion to high-yield stocks. The strategy's portfolio has about as much yield exposure as other equity strategies. 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 healthcare relative to the average peer in its category by 4.4 and 3.5 percentage points in terms of assets, respectively. The sectors with low exposure compared to their category peers are basic materials and industrials, with basic materials underweighting the average portfolio by 3.4 percentage points of assets and industrials similar to the average. The strategy owns 207 securities and is diversified among those holdings. In its most recent portfolio, 11.4% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 16.3% average. And finally, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

Even with its managers' lack of personal investment, the team managing JPMorgan Mid Cap Equity Fund stands out with a market-tested longest-tenured manager. Taken together, the strategy earns an Average People Pillar rating. The team is backed by Jonathan K.L. Simon, the longest-tenured manager on the strategy, who brings over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.7 stars, demonstrating above-average risk-adjusted performance. Jonathan K.L. Simon is supported by an experienced team, being able to draw on four additional listed managers, who average 20 years of portfolio management experience. None of the portfolio managers here invests in this fund. This hurts the rating because it suggests the team has little confidence the fund can deliver for investors, and that the alignment of managers' interests with those of the strategy's investors could be greatly improved.

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.

Outpacing both its peers and the category benchmark, this strategy's Institutional share class, has had a noteworthy track record. This share class outpaced its average peer by 1.6 percentage points annualized over a 10-year period. And it was also ahead of the category index’s, Russell Midcap Index's, gain by 61 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 come with a bumpier 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.

Fees are one of the strongest indicators of future performance. This share class imposes a fee that ranks in its Morningstar Category's middle quintile. Despite this fee, the fund’s People, Process, and Parent Pillars suggest this share class can deliver positive alpha relative to its category benchmark, leading to its Morningstar Quantitative Rating of Bronze.