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Running down JPMNX: Structural Analysis of an Alternative Mutual Fund

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JPMNX: a market neutral hedge fund strategy

Alternative mutual funds seek to mimic popular hedge fund strategies by offering exposure beyond traditional US stocks (VFINX), bonds, and cash. Additionally, they tend to have low minimum investment requirements, which makes them readily available to retail investors.

The JPMorgan Research Market Neutral Fund Institutional Class (JPMNX) is an alternative mutual fund that seeks to mimic a “market neutral” hedge fund strategy in achieving its investment objectives. The fund’s benchmark BofA Merrill Lynch 3-Month US Treasury Bill Index is an unmanaged market index of US Treasury securities with 90-days maturity period.

Each month, the index is rebalanced, and the issue selected is the outstanding Treasury bill that matures closest to (but not beyond) three months from the rebalancing date. The performance comparison of JPMNX along with its benchmark is given in the graph below as of the end of December.

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JPMNX’s historical performance and top holdings

JPMNX has underperformed compared to its benchmark, which has given low but positive returns to its investors. Also, the fund’s YTD (year-to-date) returns as of January 29, 2016, reached -1.7%, showing a continued downward trend in the fund’s performance.

JPMNX is managed by Raffaele Zingone and Steven Lee from JP Morgan Asset Management. As of December 31, 2015, the fund’s top long holdings include Lowe Cos (LOW), Avago Technologies (AVGO), Humana (HUM), and Union Pacific (UNP). The fund had a net expense ratio of 2.9%, including a management fee of 0.8%, as of January 29.

Keep reading for a more detailed analysis of JPMNX’s holdings.

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