JPMorgan California Tax Free Bond A JCBAX

The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.

The longest-tenured portfolio manager's extensive experience drives the strategy's Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process 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 California Tax Free Bond Fund earns an Above Average Process Pillar rating.

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 56%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also bolsters the rating. 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 California Intermediate Morningstar Category, this fund takes on lower credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer 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. Relative to the category average, the managers have been underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, there's been a notable 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 away from corporate bonds. Nevertheless, the fund's corporate bonds exposure was in line with peers in the latest month.

This strategy's 12-month yield is 2.5%, which mirrors its average peer. Plus, it has a 2.6% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). The portfolio has a higher average surveyed credit quality of A, compared with the typical peers' BBB, and 1% of the strategy's assets are rated non-investment-grade compared with its average peers' 0%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

The team is backed by Michelle V. Hallam, the longest-tenured manager on the strategy, who brings 20 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.5 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 10 years of listed portfolio management experience. As a team, they manage two investment vehicles together, with mixed prospects. The asset-weighted average Morningstar Medalist Rating across the strategies is Neutral. This means, in aggregate, they are not positioned to deliver positive alpha. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

Note: The People Pillar rating is indirectly assigned by an analyst. At least one of the managers on this fund manages a different product rated by an analyst. The analyst-assigned People Pillar rating(s) for these managers are combined with algorithmic scores for any non-covered managers on a tenure-weighted basis.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various global cohorts and diverse asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

Specifically, over the past 10-year period, this share class trailed its category's average return by an annualized 27 basis points. It was also not able to outpace the category benchmark, Bloomberg Barclays MF California Intermediate Municipal Bond Index, where it trailed by an annualized 45 basis points over the same period.

Even when adjusting for risk, the fund is not favorable. The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. This subpar risk-adjusted performance has not resulted in higher volatility, as measured by their standard deviation, which is close to the benchmark. 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 is within the middle quintile of its Morningstar Category. Its middling fee, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class is unlikely to deliver positive alpha relative to its category benchmark, leading to its Morningstar Medalist Rating of Neutral.