JPMorgan Tax Aware Real Return R6 TXRRX

The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.

The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy's effective investment approach 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 has an overweight in debt with 10- to 15-year maturities compared with category peers. 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 leading factor in the rating is the fund's excellent long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 56% also influences the rating. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, 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. Relative to 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 3.3% 12-month yield, higher than its average peer's 2.8%. It also has a 3.1% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Typically, higher yields come at the cost of 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 leading factor influencing the rating is its parent firm's five-year success ratio of 56%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The portfolio managers' outperformance at the funds they run, as measured by their combined three-year manager excess returns, also strengthens the rating. Lastly, the rating is limited by the instability of its management team. The fund last saw a manager change one month 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. The average Morningstar Rating of the strategies they currently manage is 3.4 stars, indicating that their risk-adjusted returns surpassed the category average. David P. Rooney has an experienced backdrop of support. The three listed managers boast 21 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.

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.

It has provided better returns compared with peers, but varied returns compared with the category benchmark. Over a 10-year period, this share class outpaced the category's average return by 1.1 percentage points annualized. However, it had an inconsistent track record compared with its category benchmark, Bloomberg Barclays Municipal 1-15 Year Bond Index, where it outperformed the index by 58 basis points over an eight-year period and underperformed by 20 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. 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 lands in the cheapest quintile of its Morningstar Category. Its competitive fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class has high potential to deliver positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Bronze.