JPMorgan Tax Aware Real Return R6 TXRRX

The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee 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 main 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. Impressive risk-adjusted performance also influences the rating. 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. However, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

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 an overweight position in 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 has a 3.5% 12-month yield, higher than its average peer's 3.0%. Plus, its 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return) sits at 3.1%. Higher yields tend to indicate higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

The main contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 3.3 stars. The combined average five-year excess return of each manager also influences the rating. It shows that the funds they manage have surpassed the average manager. Lastly, the rating is limited by the instability of its management team. The fund last saw a manager change six months ago, which suggests that it could do more to retain its portfolio managers.

The team is backed by David P. Rooney, the longest-tenured manager on the strategy, who brings 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 managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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 better returns compared with peers, but mixed returns compared with the category benchmark. This share class led its average peer by an annualized excess return of 1.1 percentage points over a 10-year period. 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 64 basis points over an eight-year period and fell behind by 21 basis points over the 10-year period.

When adjusting for risk, the fund is not shown in a favorable light. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. However, this strategy stayed in line with the benchmark's 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.

It is good practice to weigh them heavily in any investment evaluation. This share class sits in the cheapest quintile of its Morningstar Category. Its low fee, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha against its category benchmark, leading to its Morningstar Medalist Rating of Bronze.