JPM Emerging Markets Equity A (dist) USD |
Morningstar's Take
|21/03/2024by Lena Tsymbaluk
| The JPM Emerging Markets strategy’s highly experienced management team, the group’s extensive resources, and its well-codified investment process underpin our positive view. We reiterate the strategy’s People and Process ratings at High and Above Average, respectively. Leon Eidelman was formally recognized as this strategy's lead manager in July 2016, though he has been the primary decision-maker since January 2015, when he was promoted to comanager alongside well-regarded former lead manager Austin Forey. Forey is head of the Fundamental Emerging Markets team at JPM and remains a comanager here. The more recent additions (Weiying Dong, Sarah Dodson, and Komal Dhillon) to the Fundamental Emerging Markets team joined in 2021-22, bringing the overall number to seven. Dodson is the most relevant for this strategy as she will work directly with Eidelman, supporting him with analyst interaction and marketing. Management is further supported by the wider emerging-markets and Asia-Pacific (EMAP) equities team, which consists of more than 100 investment members. The team’s research analysts provide ample research support based on a well-structured and repeatable framework, ensuring the breadth and quality of coverage. The process follows the same quality/growth bias we have come to expect from strategies managed by the EMAP team. The vast majority of assets are allocated to premium and quality names, which operate in attractive industries with limited external risks, possessing strong balance sheets and solid cash flow generation. Given the focus on quality growth here, we would expect the strategy to perform well in markets driven by earnings and fundamentals. Following two very strong years for the strategy in 2019 and 2020, the period since 2021 through the end of 2023 has been challenging. The underperformance of high-quality, long-duration growth businesses during the period has been a style headwind for this quality-growth strategy. Moreover, there have been some stock-selection issues, particularly in China. Nine of the top 10 stock detractors in 2023 were in China or China-related. These were predominantly domestic names, for example, Yum China, Foshan Haitian Flavouring, Wuliangye Yibin, and AIA, which suffered from disappointing reopenings and fragile consumer confidence. Over the past 18 months, the EMAP team has been reviewing its strategic classification framework, which has led to a reclassification and downgrade of several companies (Meituan, Foshan Haitian, WuXi Biologics), where the analysts' forecasts were deemed overoptimistic. The new head of China research team, David Gleesan, will continue to work on creating a robust framework for sector analysis in China. We will keep track of its implications and monitor the outcome of stock selection in China. Nonetheless, the strategy’s long-term track record remains solid over Eidelman’s tenure, outperforming both the index and peers. The strategy’s total assets under management was around USD 32 billion as of February 2024. The US mutual and the Luxemburg-domiciled funds remain soft-closed. The UK-domiciled vehicle remains open given regulatory restrictions, but it is not marketed to new clients. |
This continues to be a strong core emerging-markets equities option. To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | High |
| Parent | Above Average |
| Process | Above Average |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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