Undiscovered Managers Behavioral Value Fund - R2 - J.P. Morgan Asset Management

The Undiscovered Managers Behavioral Value Fund currently has a limited offering. Please see the prospectus for more details.


Capitalize on behavioral biases.

By capitalizing on value opportunities stemming from behavioral biases, the Undiscovered Managers Behavioral Value Fund seeks to provide long-term capital appreciation in small cap stocks.

Fund Story >  

Key Points

  • Sub-advised by behavioral finance pioneers, Fuller & Thaler Asset Management, with a deeply experienced and stable team.
  • Targets small cap value companies that are underappreciated due to behavioral biases.
  • Looks for companies with significant insider buying or share buybacks.
  • Top-decile performance for the five- and 10-year periods.1
  • Has captured 89% of the market upside while only capturing 65% of the downside over the past five years.

Compared to benchmark and category average, in thousands (difference vs. benchmark)

1Morningstar as of 9/30/17. Small Value Category. I Shares. Performance ranked: 1-yr. (287/388), 3-yrs. (73/336), 5-yrs. (NA/292) and 10-yrs.(NA/198). See the disclosure page for additional information regarding Morningstar Ranking: based on extended performance.

Chart source: Morningstar, J.P. Morgan Asset Management; as of 9/30/17. Morningstar Small Value Category. Returns for I Share class. Other share classes may have higher expenses, which would result in lower returns. Ten-year growth with dividends and capital gains reinvested. There is no direct correlation between a hypothetical investment and the anticipated performance of the Fund. The $0 value for benchmark growth is the baseline for the over and under comparison.


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As of September 30, 2017

Quarter in review
  • The Undiscovered Managers Behavioral Value Fund (I Class Shares), which returned 4.51%, underperformed the benchmark, the Russell 2000 Value Index, which returned 5.11%, for the quarter ended September 30, 2017. The Undiscovered Managers Behavioral Value Fund (I Class Shares), which returned 7.35%, outperformed the benchmark, the Russell 2000 Value Index, which returned 5.68%, for the year ended September 30, 2017.
  • Fund benefited from its overweights to the industrials and materials sectors.
  • At the stock level, the main contributors were Brink’s Co. (1.2% portfolio weighting), Dolby Laboratories, Inc. (1.0% portfolio weighting) and PBF Energy, Inc. (1.2% portfolio weighting). The Brink’s Co. benefited from another positive earnings report and continued optimism surrounding its turnaround plan to elevate its margins to peer levels. Dolby’s valuation gained on Apple’s announcement that Dolby Vision (its version of high dynamic range video) will be on Apple TV and iPhones. PBF Energy gained on large increases in refining crack spreads resulting from Hurricane Harvey as significant U.S. refining capacity was curtailed.
  • The Fund’s underweight to the healthcare sector and overweight to information technology detracted from Fund performance.
  • At the stock level, Cardtronics plc (0.8% portfolio weighting), Colony NorthStar, Inc. (2.3% portfolio weighting) and Sprouts Farmers Market, Inc. (1.0% portfolio weighting) were the largest detractors from performance. Cardtronics declined as it retracted earlier favorable commentary regarding 2018 profitability and on news that Australia’s largest banks were eliminating their ATM surcharge fees. Colony Northstar reported second-quarter earnings that were slightly below market expectations as weakness in its health-care and hospitality segments offset the strength of its industrial segment. Sprouts declined on news that Amazon purchased Whole Foods, and subsequently lowered prices on several items.
Looking ahead
  • The Fund had a realized Beta of 0.79 and lower realized year-to-date volatility than the Russell 2000 Value index (11.1% versus 13.3%, respectively) based on daily returns. The Barra forecasted Beta is 0.88.
  • The end-of-quarter cash level was 1.2%, which declined from 3.7% at the end of the second quarter, 7.8% at the end of the first quarter and 12.7% at year-end 2016. The Fund’s cash level was reduced during the quarter as we invested in five new companies, all of which had insider buying. We also reallocated some capital to existing holdings. Notably we were able to increase our weight in banks at substantial discounts in the range of 20-30% off recent peak prices.
  • Three of the new companies we purchased in the third quarter were banks. Year to date, we have brought our bank weight up to 14.7% from 8.8% (excluding Private Bancorp, which was acquired by a Canadian bank and sold from the portfolio). While we continue to be vigilant given where we likely are in the credit cycle, this year has presented some good opportunities to reduce our underweight to the bank industry, which comprised 22.8% of the Russell 2000 Value Index at the end of the third quarter.

Fees and Minimums

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Fund Managers



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 1.30% for A Shares, 1.80% for C Shares, 1.05% for I Shares, 0.90% for L Shares, 1.55% for R2 Shares, 1.30% for R3 Shares, 1.05% for R4 Shares, 0.90% for R5 Shares and 0.80% 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 12/31/2017 for A Shares, 12/31/2017 for C Shares, 12/31/2017 for I Shares, 12/31/2017 for L Shares, 12/31/2017 for R2 Shares, 2/28/2018 for R3 Shares, 2/28/2018 for R4 Shares, 2/28/2018 for R5 Shares and 12/31/2017 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.

The quoted performance of the Fund includes performance of a predecessor fund/share class prior to the Fund's commencement of operations. Please refer to the current prospectus for further information.

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

The Russell 2000 Value Index is an unmanaged index, measuring performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

The performance of the Lipper Small-Cap Value Funds Index 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.

Small-capitalization investments typically carry more risk than investments in well-established "blue-chip" companies since smaller companies generally have a higher risk of failure. Historically, smaller companies' stock has experienced a greater degree of market volatility than the average stock.

From the commencement of operations of the Fund's Institutional Class until January 30, 2004, the Fund's investment adviser was Undiscovered Managers, LLC. Effective January 31, 2004, J.P. Morgan Investment Management, Inc. (JPMIM) became the Fund's investment advisor. Fuller & Thaler Asset Management, Inc. serves as the Fund's sub-advisor. The Fund is currently waiving fees. Please note the removal of this waiver would reduce returns.
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.

Beta measures a fund's volatility in comparison to the market as a whole. A beta of 1.00 indicates a fund has been exactly as volatile as the market.

Sharpe ratio measures the fund's excess return compared to a risk-free investment. The higher the Sharpe ratio, the better the returns relative to the risk taken.

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

Alpha: The relationship between the performance of the Fund and its beta over a three-year period of time.

Standard deviation/Volatility: A statistical measure of the degree to which the Fund's returns have varied from its historical average. The higher the standard deviation, the wider the range of returns from its average and the greater the historical volatility. The standard deviation is calculated over a 36-month period based on Fund's monthly returns. The standard deviation shown is based on the Fund's Class A Shares or the oldest share class, where Class A Shares are not available.

R2: The percentage of a Fund's movements that result from movements in the index ranging from 0 to 100. A Fund with an R2 of 100 means that 100 percent of the Fund's movement can completely be explained by movements in the Fund's external index benchmark.

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

Risk measures are calculated based upon the Funds' broad-based index as stated in the prospectus.