JPMorgan Diversified I JDVSX

The portfolio maintains a 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 the Europe-Developed region and the consumer cyclical sector compared with category peers. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

JPMorgan Diversified Fund earns an Above Average Process Pillar rating.

The leading factor in the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Strong risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. However, the process is limited by the parent firm's five-year retention rate of 80%, which suggests it could do more to hold onto its portfolio managers.

This strategy has an equity position similar to Moderate Allocation peers but holds more assets in fixed income, with a 57% to 39% equity to fixed-income composition. Its equity sleeve has exhibited a continual bias to growth stocks compared with the category average. Although in terms of market-cap exposure, it resembles most peers. The strategy has three region or sector biases compared to category peers. The most significant is a tilt to the Developed Europe region, where the strategy is consistently overweight. It also routinely positions more assets in the consumer cyclical sector. And finally, in the fund's most recent portfolio, less assets were allocated to developed markets regions. Although, this bias has not existed over time.

The portfolio has allocations in its top two sectors, consumer cyclical and energy, that are similar to the category. The sectors with low exposure compared to category peers are communication services and healthcare, underweight the average by 2.8 and 2.7 percentage points of assets, respectively. The portfolio is overweight in Developed Europe and Japan regions relative to the category average by 6.8 percentage points and 3.8 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Middle East and Africa, with North America underweight the average by 17.0 percentage points and Middle East and Africa similar to the average.

The team is backed by Jeffrey A. Geller, the longest-tenured manager on the strategy, who provides 23 years of listed portfolio management experience. Jeffrey A. Geller has an experienced backdrop of support. The three listed managers boast 17 years of average listed portfolio management experience. As a team, they manage three investment vehicles together, with solid long-term prospects. The strategies average a Bronze asset-weighted average Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. The management team is invested in the fund, but the maximum investment by any manager is between$ 500,000 and$ 1 million. An investment of more than$ 1 million would be ideal to align managers' interests with those of the fund's investors.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

Over a 10-year period, this share class outperformed the category’s average return by 77 basis points annualized. And it was also ahead of the category index, the Morningstar Moderate Target-Risk Index, by 97 basis 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. Often, higher returns are associated with more risk. However, this strategy stayed in line with the benchmark's 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.

This share class is within the second-cheapest quintile of its Morningstar Category. Its affordable fee, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Bronze.