Does JPMorgan Chase Add Value For Investors?

In an April column, New York Times reporter Nathaniel Popper noted that, over the last few years, an expanding line of mutual funds created by large commercial banks has attracted billions of dollars from investors looking to earn a good return. But have those actively managed mutual funds been good investment choices?

In the previous installment of my series, which systematically evaluates the results posted by some of the market’s foremost fund families, I examined the performance of funds managed by Goldman Sachs Asset Management. Today, I’ll take an in-depth look at the mutual funds offered by another commercial bank, JPMorgan Chase.

In his article, Popper observed that, over the last 10 years, Morningstar data shows just 31% of JPMorgan Chase’s mutual funds were able to outperform their analyst-assigned benchmarks.

Despite this underperformance, JP Morgan Chase asserts that its “investment engines provide more diversified return sources and the potential for positive results even in challenging markets.” The firm explains that a “research-driven information advantage” provides investors with a “growing network of career research analysts focused entirely on studying their industries and companies.” They add: “An unrelenting focus on risk management” offers a “consistent, repeatable approach across unpredictable markets, backed by standardized investment practices and research platforms.”

Furthermore, the firm states that it has 900 investment professionals in 23 countries, of which more than 340 are career analysts averaging 15 years of experience. Certainly, JPMorgan Chase has been successful at gathering assets. It is the eighth largest U.S. mutual fund company, and it has $1.7 trillion in assets under management across the globe. According to Morningstar, as of April 30, 2015, J.P. Morgan Asset Management had more than $318 billion in assets under management in mutual funds.

But the question remains: Have their funds been adding value for investors, or has the firm itself been the real beneficiary?

Active versus passive 

As is my practice, I will compare the performance of JPMorgan Chase’s actively managed equity funds to similar offerings from two prominent providers of passively managed funds, Dimensional Fund Advisors (DFA) and Vanguard. (Full disclosure: My firm, Buckingham, recommends DFA funds in constructing client portfolios.)

To both keep the list to a manageable number of funds, as well as to make sure we examine long-term results through full economic cycles, I’ll cover the 15-year period from April 2000 through March 2015. I’ll use the lowest cost shares when more than one class of fund is available for the full period. In cases where JPMorgan Chase has more than one fund in the asset class, I’ll use the average return of their funds in the comparison. The table below shows the performance of 22 of JPMorgan Chase’s mutual funds (16 domestic and six international) in 12 asset classes.