JPMorgan Tax Aware Real Return A TXRAX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-highest quintile among peers.

The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in BBB rated bonds and an overweight in debt with 10- to 15-year maturities compared with category peers. The management team's considerable industry experience earns it an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

JPMorgan Tax Aware Real Return Fund earns an Above Average Process Pillar rating.

The most substantial contributor to the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Noteworthy risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the number of months that the management team has been running this vehicle together.

Compared with other funds in the Muni National Interm Morningstar Category, this fund has been consistently sensitive to interest-rate changes over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been underweight BBB rated bonds in recent years. In the latest month, the strategy has also relatively underweighted BBB rated bonds compared with Morningstar Category peers. Additionally, there's been a bias towards debt with 10- to 15-year maturities over the past few years. Compared with category peers, the strategy had more exposure to debt with 10- to 15-year maturities in the most recent month. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

This strategy's 12-month yield is 3.1%, which mirrors its average peer. It also has a 2.7% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

The most notable contributor to the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 3.3 stars. The portfolio managers' outperformance at the funds they run, as measured by their combined three-year manager excess returns, also influences the rating. Lastly, the rating is limited by the turnover of its management team. The fund last saw a manager change five months ago, which suggests that it could do more to retain its portfolio managers.

David P. Rooney, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. David P. Rooney has an experienced backdrop of support. The three listed managers boast 17 years of average listed portfolio management experience. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

J.P. Morgan is a well-resourced, diligent, and responsible steward of client assets. Investment teams are seasoned and stalwart, especially in equity and fixed income, the latter of which has successfully undergone substantial transformation in recent years. The firm offers competitive compensation that is aligned with fundholders and shows strong retention at senior levels of the organization. It demonstrates a culture of constant innovation and willingness to evolve. For example, J.P. Morgan recently expanded its investment committee process through which senior leaders review various teams and strategies, and it continues to develop proprietary portfolio management and risk oversight tools. Some funds still face high fee hurdles, but the firm has generally lowered expenses as it has grown.

The firm isn't without its complications. J.P. Morgan's product offering is extensive, and some areas need improvement. For instance, its multi-asset business has faced some challenges as a result of complex investment processes. The firm continues to build out its footprint in China, but its efforts there remain unproven. Although not every strategy is the best in its class, J.P. Morgan remains earnest in the pursuit of excellence, and investors are well-served.

It has provided superior returns compared with peers, but varied returns compared with the category benchmark. Over a 10-year period, this share class outperformed the category’s average return by 70 basis points annualized. But despite the above-average returns against peers, it had a mixed track record compared with the category index, Bloomberg Barclays Municipal 1-15 Year Bond Index. It led the index by 39 basis points over an eight-year period and trailed it by 58 basis points over the 10-year period.

When adjusting for risk, the fund is not as favorable. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. But notably, these subpar risk-adjusted results have not come with more volatility than the benchmark, as measured by standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class sits in the second-costliest quintile of its Morningstar Category. Its pricey expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class could struggle to deliver positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Neutral.