JPMorgan Hedged Equity Fund - A - J.P. Morgan Asset Management
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JPMORGAN HEDGED EQUITY FUND

Get invested, stay invested.

Combining our proven equity research with a disciplined index options strategy, the Hedged Equity Fund enables investors to participate in equity market gains, while mitigating risk in declining markets.

Read the latest Portfolio Manager insights   Fund Story   Barron's Article: The five-star JPMorgan Hedged Equity Fund seeks to minimize volatility  

Key Points

Expertise
  • Managed by experienced portfolio managers Hamilton Reiner and Raffaele Zingone, leveraging insights from 24 equity analysts.
Portfolio
  • Designed to help investors participate in equity market gains, while hedging against market declines.
Success
  • Top decile performance over trailing three-year period in Morningstar Option Writing Category.1
THREE YEAR RISK/RETURN VS. THE S&P 500

1Source: Morningstar, I Shares as of 6/30/17. Option Writing Category. Ranked: 1-yr. (7/114), 3 yrs. (7/77), 5- and 10-yrs. N/A.

Chart source: Morningstar Direct, I Shares as of 6/30/17. No representation is being made that any portfolio will or is likely to achieve profits or losses similar to those shown.

Hedged equities: the upside of downside protection

Hamilton Reiner | October 21, 2015

Watch as Hamilton Reiner, Portfolio Manager and Head of U.S. Equity Derivatives, discusses his 4 primary beliefs in regards to hedged equity strategies.

Performance

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Commentary

As of September 30, 2017

Quarter in review
  • The JPMorgan Hedged Equity Fund (I Class Shares) underperformed the benchmark, the S&P 500 Index, for the quarter ended September 30, 2017, with roughly two-thirds of the benchmark’s volatility, once again delivering a quarterly experience in line with expectations.
  • Within health care, an underweight position in Medtronic, Inc. (0.0% portfolio weighting) contributed as recent execution was inconsistent and its topline growth faded as its favorable product cycle begins to lap. We remain negative on the name as its product pipeline is relatively unimpressive and its limited drivers of upside outside of its diabetes product leave its topline growth in an unattractive position.
  • In information technology, an underweight in Oracle Corp. (0.1% portfolio weighting) added value after reporting an inline quarter that revealed limited sources of growing organic revenue and slowing cloud revenue. We remain concerned with the company’s ability to navigate its transition from a fixed license revenue system to a cloud-based subscription model amidst limited sources of organic growth
  • In industrials, an underweight position in Boeing Co. (0.0% portfolio weighting) detracted as global air traffic growth continued at above-average rates, leading management and some investors to doubt the long-term cyclicality of the aerospace industry. We continue to think Boeing is overearning in the short-term as its recent free cash flow benefits do not seem to be sustainable and feel that the industry is still cyclical.
  • Also in industrials, an overweight position in United Continental Holdings, Inc. (0.3% portfolio weighting) weighed on performance after competitive pricing efforts with rival Spirit Airlines lowered investor sentiment and drove multiple compressions. We still believe in the long-term story of margin expansion, but have reduced our near-term exposure due to a lack of clarity from management about medium-term financial targets and how long the price competition may last.
Looking ahead
  • We expect the momentum experienced thus far this year to largely continue through the remainder of 2017. The continuation of the earnings environment experienced during the last few quarters should be largely supportive of our positioning.
  • Our core sector tilts have remained constant, as we are retaining our favorable view of big banks and brokers, health services and systems and insurance, and our negative stance on consumer staples, real estate investment trusts and utilities.
  • The Fund continues to be a broadly diversified portfolio of U.S. large-cap stocks, seeking to add value through bottom-up stock selection as the primary driver of excess returns.

Fees and Minimums

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Portfolio

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Management

Fund Managers

Documents

Disclaimer

1Please refer to the prospectus for additional information about cut-off times.

Total return assumes reinvestment of income.

The Fund's adviser and/or its affiliates have contractually agreed to waive fees and/or reimburse expenses to the extent Total Annual Fund Operating Expenses (excluding acquired fund fees and expenses, dividend and interest expenses related to short sales, interest, taxes, expenses related to litigation and potential litigation and extraordinary expenses) exceed 0.85% for A Shares, 1.35% for C Shares, 0.60% for I Shares, 0.40% for R5 Shares and 0.35% for R6 Shares of the average daily net assets. The Fund may invest in one or more money market funds advised by the adviser or its affiliates (affiliated money market funds). The Fund's adviser has contractually agreed to waive fees and/or reimburse expenses in an amount sufficient to offset the fees and expenses of the affiliated money market funds incurred by the Fund because of the Fund's investment in such money market funds. This waiver is in effect through 10/31/2017 for A Shares, 10/31/2017 for C Shares, 10/31/2017 for I Shares, 10/31/2017 for R5 Shares and 10/31/2017 for R6 Shares, at which time the adviser and/or its affiliates will determine whether to renew or revise it. The difference between net and gross fees includes all applicable fee waivers and expense reimbursements.

Mutual funds have fees that reduce their performance: indexes do not. You cannot invest directly in an index.

The S&P 500 Index is an unmanaged index generally representative of the performance of large companies in the U.S. stock market. Index levels are in total return USD.

The BofA Merrill Lynch US 3-Month Treasury Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month. The index is rebalanced monthly and the issue selected is the outstanding Treasury Bill that matures closest to, but not beyond 3 months from the rebalancing date.

The performance of the Lipper Alternative Long/Short Equity Funds Average includes expenses associated with a mutual fund, such as investment management fees. These expenses are not identical to the expenses charged by the Fund.

Total return figures (for the fund and any index quoted) assume payment of fees and reinvestment of dividends (after the highest applicable foreign withholding tax) and distributions. Without fee waivers, fund returns would have been lower. Due to rounding, some values may not total 100%.

©2017, American Bankers Association, CUSIP Database provided by the Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. All rights reserved.
The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10- year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.Rankings do not take sales loads into account.
The following risks could cause the fund to lose money or perform more poorly than other investments. For more complete risk information, see the prospectus.

Investments in derivatives may be riskier than other types of investments. They may be more sensitive to changes in economic or market conditions than other types of investments. Many derivatives create leverage, which could lead to greater volatility and losses that significantly exceed the original investment.

The prices of equity securities are sensitive to a wide range of factors, from economic to company-specific news, and can fluctuate rapidly and unpredictably, causing an investment to decrease in value.

Positions in equity options can reduce equity market risk, but can limit the opportunity to profit from an increase in the market value of stocks in exchange for upfront cash at the time of selling the call option. Unusual market conditions or the lack of a ready market for any particular option at a specific time may reduce the effectiveness of option strategies and could result in losses.

Utilizing a strategy with a diversified equity portfolio and derivatives, with a Put/Spread Collar options overlay, may not provide greater market protection than other equity investments nor reduce volatility to the desired extent, as unusual market conditions or the lack of a ready option market could result in losses. Derivatives expose the Fund to risks of mispricing or improper valuation and the Fund may not realize intended benefits due to underperformance. When used for hedging, the change in value of a derivative may not correlate as expected with the risk being hedged.
Total return assumes reinvestment of income.

The top 10 holdings listed reflect only the Fund's long-term investments. Short-term investments are excluded. Holdings are subject to change. The holdings listed should not be considered recommendations to purchase or sell a particular security. Each individual security is calculated as a percentage of the aggregate market value of the securities held in the Fund and does not include the use of derivative positions, where applicable.

P/E ratio: the number by which earnings per share is multiplied to estimate a stock's value.

P/B ratio: the relationship between a stock's price and the book value of that stock.

Tracking Error: The active risk of the portfolio, which determines the annualized standard deviation of the excess returns between the portfolio and the benchmark.

EPS: Total earnings divided by the number of shares outstanding.