JPMorgan Strategic Income Opports I JSOSX

The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.

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 has maintained a significant overweight position in AAA rated bonds and an underweight in debt with 20- to 30-year maturities 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 Strategic Income Opports Fd earns an Above Average Process Pillar rating.

The largest contributor to 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. Impressive risk-adjusted performance also supports the process. 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 being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

Compared with other funds in the Nontraditional Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the average strategy in the category, the managers have been overweight AAA rated bonds in recent years. In the latest month, the strategy has relatively overweighted AAA rated bonds compared with its peers as well. Additionally, there's been a notable bias away from debt with 20- to 30-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with 20- to 30-year maturities than peers. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

This strategy's 12-month yield is 5.1%, which is neck-and-neck with its average peer. Plus, it has a 5.0% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). The portfolio has a higher average surveyed credit quality of A, compared with the category average of BB, and 3% of the strategy's assets are rated non-investment-grade compared with its average peers' 24%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

The team is backed by William H. Eigen, the longest-tenured manager on the strategy, who provides 23 years of listed portfolio management experience. William H. Eigen has an experienced backdrop of support. The three listed managers boast 20 years of average listed portfolio management experience. At least one member of the team has invested$ 1 million or more of their own capital in the fund, which helps align their interests with the strategy'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 outpaced the category's average return by 46 basis points annualized. And it also beat the category index, the ICE BofA US 3 Month Deposit OR CM Index, by an annualized 76 basis points over the same period.

When adjusting for risk, the fund is not shown in a favorable light. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. In addition to its subpar risk-adjusted performance, the strategy also took on elevated risk, as measured by a higher standard deviation, 2.2%, than the benchmark, 0.5%. However, 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 sits in the second-cheapest quintile of its Morningstar Category. Its low fee, taken together with the fund’s People, Process, and Parent Pillars, indicates that this share class has high potential to deliver positive alpha relative to its category benchmark, explaining its Morningstar Medalist Rating of Bronze.