JPMorgan SMID Cap Equity’s stable, proven team and differentiated investment process earn it a Morningstar Analyst Rating of Silver for its cheapest share classes and Bronze for pricier ones.
This strategy earns its keep by losing less in down markets, but an untimely underweight to energy stocks prevented it from delivering better results through the first five months of 2022 as the sector’s market value soared. Managers Don San Jose and Dan Percella sold the fund’s energy holdings in November 2020 when they inherited control from another management team. (They had previously done so at sibling fund JPMorgan Small Cap Equity VSEIX.) They felt it had become too difficult to find energy companies predictable enough to fit with their process, particularly given high commodity-price volatility. Unfortunately for the strategy, energy has outperformed all other sectors since that time, helping explain the fund’s pedestrian performance during the 2022 bear market: The institutional shares fell 14.4% for the year to date through May, trailing the Russell Mid Cap category benchmark by about 1.5 percentage points and the Russell 2500 prospectus benchmark by roughly 1 percentage point. However, outside of energy, portfolio holdings performed well and provided some ballast.
San Jose and Percella have managed this strategy since April 2016 in separate accounts that on their watch have outperformed both relevant benchmarks . The process is a carbon copy of their highly successful small-cap strategy but ventures further into mid-cap territory. While the comanagers have leaned on just two analysts, their focus on high-quality companies operating in niche industries keeps their sights narrow. Still, some extra help could be useful, and encouragingly, the team officially named Jesse Huang as an associate analyst in 2022. Huang has worked at J.P. Morgan for six years and assisted the team for the past four. His new coverage responsibilities will also help free up time for San Jose to carry out his duties as J.P. Morgan’s new CIO of value investing, a people management and oversight role. His primary job will still be managing his existing charges.
The strategy remains in capable hands and is a strong option for investors.