These 2 Fund Families Earned the Most Overall Ratings Upgrades in 2024
Team changes drove downgrades at T. Rowe Price.
Of the 20 largest fund families in the US, JPMorgan and Fidelity’s strategies are among the most improved in 2024 when it comes to their prospects for beating appropriate benchmarks.
The Morningstar Medalist Rating framework looks at fundamental attributes like research expertise, investment approach, and fees to evaluate a strategy’s likelihood of beating a suitable benchmark after fees over the long term. If we think a fund has enduring competitive advantages, it earns one of the higher Medalist Rating—Gold, Silver, or Bronze. This article aggregates Medalist Ratings to the overall fund family to understand which companies are seeing upgrades and which have experienced downgrades.
The Medalist Rating comprises three pillars: Process, People, and Parent account for 45%, 45%, and 10%, respectively, of an actively managed strategy’s overall rating (for passive strategies, Process accounts for 80%, and People represents 10%). Most, though not all, of the strategies that experienced ratings changes in 2024 are actively managed. Analysts assign these pillar ratings directly for nearly 2,000 unique US-domiciled funds as of December 2024, and Morningstar’s rules-based system and machine-learning model expand coverage to encompass most of the US fund universe. This article looks at those strategies fully covered by analysts.
5 Fund Companies With the Most Overall Ratings Upgrades in 2024
JPMorgan and Fidelity topped the list of the 20 largest fund companies making material improvements to their strategy lineup in 2024, with seven upgrades apiece. These improvements made them more attractive long-term picks in the eyes of Morningstar’s analysts. Both firms boast well-staffed research teams that drive competitive advantages in areas of the market that can be difficult to consistently outperform, like US equities.
High-rated Capital Group and T. Rowe Price landed among the top five firms for overall upgrades in 2024, and it’s worth pointing out that they have less room for improvement than some of the other firms because many of their strategies already earn high Morningstar Medalist Ratings. At the beginning of 2024, more than three fourths of T. Rowe Price’s strategies carried Gold or Silver Medalist Ratings; meanwhile, more than half of Capital Group’s strategies already earned Gold Medalist Ratings.
5 Fund Companies With the Most Medalist Ratings Upgrades in 2024
It hasn’t been easy for active managers to outperform passive peers in US large-cap equities recently, but comanagers Susan Bao and Steven Lee, backed by JPMorgan’s deep bench of sector analysts, run an effective process that merits conviction. JPMorgan US Large Cap Core Plus JLPYX earned a Process upgrade to Above Average from Average, which drove the institutional shares’ overall rating to Silver from Bronze. Morningstar Director of Manager Research Jeffrey Schumacher notes that the team’s “classic fundamental bottom-up research should give the fund an informational advantage, where the managers implement long and shorts through pair trades … with the portfolio’s net exposure to the market kept at 100%.” Furthermore, JPMorgan’s “vast analytical resources backing the strategy are paramount for its success,” according to Schumacher.
JPMorgan Core Bond JCBUX earned upgrades on its Process and People Pillar ratings to High from Above Average. That lifted the Medalist Rating for the institutional shares to Gold from Silver. Veteran managers Rick Figuly and Justin Rucker run a disciplined, bottom-up process that earns this strategy a place among the category’s best. Senior Analyst Paul Olmsted points out that “Diligent bond-picking, especially within the strategy’s securitized allocations, has been a mainstay here and gives this fund its edge. Emphasis on diversification and predictability … help this strategy outperform when bond prices rally and hold up when they falter.”
At Fidelity, emerging-markets debt managers Tim Gill and Nader Nazmi have earned their stripes. Fidelity Advisor New Markets Income FGBMX saw upgrades of both its People and Process Pillars to Above Average from Average. That boosted the $4.7 billion fund’s institutional shares to Bronze from Neutral. Associate Director Shannon Kirwin notes that Gill and Nazmi are experienced emerging-markets investors, though neither had served as lead manager of a strategy before taking over this one in September 2020. Gill has a long tenure at Fidelity, while Nazmi’s “eclectic” background includes advising the Central Bank of Ecuador and working as a sovereign economist focused on Latin American countries. The duo has also strengthened the process, which helped the strategy navigate turbulent waters with ease. Kirwin sums it up well: “With a structured process and an experienced analyst team in place, the managers are well-placed to meet the market’s challenges going forward.”
In the case of Fidelity Advisor Technology FIKHX, Analyst Tony Thorn highlights “improved stability and increased confidence in lead manager Adam Benjamin” as driving an upgraded People Pillar to Above Average from Average. That drove the funds’ institutional shares to Bronze from Neutral. “Benjamin is an experienced tech investor, working in the sector his entire career. Starting in 2000, he was a sell-side tech analyst and investment banker in the tech hardware industry for almost 11 years … He served as Fidelity Institutional Asset Management’s global tech sector lead for six years before joining this strategy in 2020.” But it isn’t just the lead manager driving Morningstar’s confidence: “Benjamin also has the luxury of using Fidelity’s deep and well-regarded team of tech analysts. The group’s global presence and access to corporate leadership are big advantages in the ever-evolving tech industry.”
5 Fund Companies With the Most Overall Ratings Downgrades in 2024
T. Rowe Price took fifth place for overall upgrades, but it also saw the most downgrades out of the 20 largest fund companies. In each case, our analysts detected deteriorating attributes in the team or process, and that spurred the downgrade. However, some of the funds highlighted here have Morningstar Medalist Ratings of Silver and Bronze, which means that they still carry competitive advantages, even if they have slipped a notch.
5 Fund Companies With the Most Medalist Ratings Downgrades in 2024
T. Rowe Price’s municipal-bond team remains collaborative, sizable, and experienced, but personnel turnover drove People rating downgrades to Above Average from High on four of its strategies. This led to Morningstar Medalist Rating downgrades across the board, with T. Rowe Price Tax Free High Yield’s PTYIX institutional shares landing at Silver, T. Rowe Price Summit Municipal Intermediate PRTMX and T. Rowe Price Tax Free Short-Intermediate TTSIX landing at Bronze, and T. Rowe Price Summit Municipal Income PRIMX dropping to Neutral. Associate Director Beth Foos points out that the muni analyst and trader team “has experienced ongoing change as well. In 2024, four members of the team departed the firm, including two credit analysts, an associate analyst, and a trader.” A High People rating is a high bar indeed, but Morningstar’s analysts still have enough conviction to support Above Average People ratings.
In the case of T. Rowe Price Overseas Stock TROIX, Ray Mills’ retirement drove a People rating downgrade to Average from Above Average. Although the retirement was forecast in advance, and his successor—Elias Chrysostomou—has experience with the strategy, Morningstar’s analysts generally apply some caution in the case of leadership changes. Senior Analyst Bill Rocco notes that, “Mills has been at the helm of this mutual fund for 17 years, and he is skilled as well as seasoned, so his departure will be a significant loss. Moreover, Chrysostomou’s overall experience as a portfolio manager is still fairly limited in length and scope.” Accordingly, the fund’s Medalist Rating was lowered to Bronze from Silver.
Fund Families Drive Investment Excellence
Even the strongest portfolio managers and investment philosophies rely on the support and infrastructure of their respective fund companies, which Morningstar refers to as a strategy’s Parent. As such, the Morningstar Parent Pillar rating represents 10% of each strategy’s Medalist Rating.
The Parent rating indicates Morningstar analysts’ opinion of how well an asset manager cares for assets under management in the best interests of investors who buy its products. This includes analysis of a firm’s investment culture, business practices, and the philosophies that guide fees and compensation, among others. The exhibit below includes key information for the 20 largest fund families—including each firm’s Parent rating. Contrary to the remainder of this article, the Medalist Ratings in the table below include quantitatively derived, as well as analyst-driven, ratings.
Top 20 Largest Fund Families in the US
The 20 largest US fund families maintained their respective Parent ratings in 2024. Of the 20 largest, six firms earn High Parent ratings: Vanguard, T. Rowe Price, Capital Group, MFS, Dimensional, and Dodge & Cox. As this article illustrates, highly rated fund families are not immune to personnel and strategy changes, but Morningstar’s analysts look favorably upon their investment cultures, abilities to retain topnotch talent, and business philosophies. These firms should be capable, long-term providers of the ingredients necessary to bake the perfect holiday dessert: a first-rate investment strategy.
For more information on the 150 largest US fund families, download this summer’s Morningstar Fund Family 150 Digest here.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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