American Funds Limited Term Tax-Exempt Bond Fund® Class F-3 FLTEX

American Funds Limited Term Tax-Exempt Bond pairs an experienced management duo and deep analytical firepower with a research-intensive approach designed to surface attractive relative value opportunities. The strategy is an excellent option for short-term municipal-bond investors willing to stomach some interest rate volatility.

One of the industry’s strongest teams steers this strategy. Investment-grade muni specialist Mark Marinella has led the strategy as principal investment officer since January 2019 and brings nearly four decades of industry experience. Comanager Vikas Malhotra, a former muni credit analyst, worked alongside Marinella on the strategy in an unnamed capacity beginning in July 2021 before becoming a named manager in July 2022. The duo draws on a deep supporting team of 10 analysts, six traders, and Capital Group’s risk and quantitative specialists, which strengthens the strategy’s research, trading, and risk oversight. Together, the team’s experience and research capabilities help them find attractive short-duration municipal bonds that fit the portfolio’s limited-term mandate.

Capital Group’s multimanager system allows each manager’s best ideas to shape the portfolio. The managers each oversee a separate, roughly equal sleeve and independently make buy, sell, and position-sizing decisions, while principal investment officer Marinella keeps aggregate exposures aligned with the strategy’s parameters and the Bloomberg Municipal Short-Intermediate 1-10 Year Index. The managers rely primarily on sector allocation and bottom-up security selection to drive excess returns. They avoid leverage and high-yield debt, and although the fund can hold up to 20% in bonds rated BBB, exposure generally remains much lower. Rather than assuming significant credit risk, the managers seek additional yield through structural complexity in highly rated securities, as reflected in their preference for housing and corporate-backed munis, including prepaid gas bonds.

The portfolio’s duration (a measure of interest rate sensitivity) is an outlier within the muni national short Morningstar Category. Its 4.0-year duration as of September 2026 was longer than the 2.2-year peer median, leaving the fund considerably more sensitive to changes in interest rates than most short-term muni peers.

The fund’s structurally longer duration has supported strong long-term peer-relative results, though often at the cost of elevated volatility. From January 2019 through October 2026, the F3 shares’ 2.3% annualized return ranked near the top decile of distinct peers and beat the Bloomberg Municipal Short-Intermediate 1-10 Year Index by 27 basis points. However, its longer duration relative to short-term muni peers can weigh on performance when rates rise, such as during the rate-driven selloffs in 2022 and third-quarter 2026.

Compelling fundamental research and strong coordination underpin this strategy’s repeatable and risk-aware process; it earns a High Process rating.

Capital Group’s multimanager system fosters the best ideas in the portfolio. It gives the two managers discretion over buy, sell, and sizing decisions when building their respective sleeves, while principal investment officer Mark Marinella ensures the portfolio’s overall exposures remain balanced and aligned with the strategy’s investment parameters relative to the Bloomberg Municipal Short-Intermediate 1-10 Year Index. The managers incorporate input from analysts and traders when valuing bonds, sourcing opportunities, and constructing the portfolio. The firm’s risk and quantitative group, led by Chris Brune, also provides ongoing support, strengthening portfolio oversight.

The firm’s broad fixed-income research capabilities give this team a strong toolkit to adjust the portfolio nimbly as opportunities arise. Even so, several long-standing preferences provide consistency. For example, the managers favor revenue bonds with steady cash flows and maintain consistent underweighting in general-obligation bonds. The team avoids leverage and high-yield debt, and although it can hold up to 20% in BBB rated munis, it has kept that stake much lower. Rather than reaching for yield in lower-quality credit, the managers look toward complex, highly rated bonds such as housing muni bonds. Capital Group’s broad research capabilities support this, including corporate credit analysis of the banks and insurers behind prepaid gas deals.

The portfolio’s interest rate sensitivity is an outlier in the muni national short category. The managers typically keep duration within half a year of the Bloomberg Municipal Short-Intermediate 1-10 Year Index, leaving the fund more interest rate sensitive than most short-term muni peers. The fund’s 4.0-year duration as of September 2026 exceeded the peer median’s 2.2 years, creating a meaningfully different risk profile than many strategies benchmarked to shorter indexes.

The managers consistently overweight revenue bonds and shift sector exposures based on relative value and fit with the strategy’s limited-term mandate. The fund’s 80.5% revenue-bond stake as of September 2026 was higher than the index’s 72.7%, with housing (23.4% of assets as of September 2026) and corporate-backed (19.1%) municipals representing the largest overweighting. The housing stake declined from 31.0% in September 2024 as single-family mortgage bonds amortized, though the managers continued to favor the sector for its relative value. Healthcare exposure rose to 8.0% from 6.3% a year earlier. Within the healthcare sector, the managers target bonds that issuers repay from entrance fees as newly built facilities fill up, resulting in relatively short expected lives that fit the portfolio’s limited-term mandate.

The managers avoid high-yield debt and selectively add bonds rated BBB as relative value changes. The portfolio’s 4.6% BBB stake as of September 2026 was below the category peer median’s 8.3% and its 5.6% trailing three-year average, with exposure ranging from roughly 4%-7% over that period. The lower allocation reflected better relative value among bonds rated AA or higher, including housing securities, rather than a deliberate effort to reduce risk.

The managers’ extensive municipal experience and Capital Group’s deep supporting resources position this team among the very best in the category, supporting a High People Pillar rating.

A seasoned duo with strong short-term muni expertise leads the strategy. Investment-grade muni specialist Mark Marinella has served as principal investment officer since January 2019. Marinella brings nearly four decades of industry experience, including serving as global chief investment officer for fixed income and currencies at State Street Global Advisors before joining Capital Group in 2013. Comanager Vikas Malhotra joined Capital Group in 2016 as a muni credit analyst covering several sectors, including transportation, and brings more than a decade of industry experience. Malhotra worked alongside Marinella on the strategy in an unnamed capacity beginning in July 2021 before becoming a named manager in July 2022.

Capital Group’s muni analysts and traders strengthen security selection and portfolio construction. A 10-member credit analyst team provides fundamental research and relative-value recommendations, while six dedicated traders help the managers source bonds and assess market liquidity. Combining the managers’ experience with this deep analyst and trading support helps the team uncover attractive short-duration muni bonds that fit the portfolio’s limited-term mandate.

Manager ownership, which reflects alignment with investors, is strong across Capital Group's municipal lineup. Both Marinella and Malhotra invest between USD 100,001 and USD 500,000 in this fund.

Capital Group stands out from the pack as it enhances capabilities around strong core competencies. It earns a High Parent rating.

Since 1931, Capital Group, parent of American Funds, has thoughtfully built out capabilities to become one of the world’s largest asset managers, managing more than USD 3 trillion dollars. Building on the success of its long-term-oriented, multiple-manager system for global equities, the firm has developed robust fixed-income and multi-asset units, each managing more than USD 500 billion. In January 2026, as part of its periodic review of its now five distinct research organizations, Capital Group implemented changes to its equity investment subsidiaries. This exercise resulted in most equity strategies having at least one portfolio manager change, but according to the firm, it better balances each of Capital Group’s three equity groups in terms of investment breadth and helps the firm better align leadership opportunities across the groups. These kinds of shifts have occurred before, with the last coming in 2018.

Capital Group has also turned its attention to some modern opportunities. To address public/private market convergence trends, it launched in April 2025 two semiliquid funds with private market giant KKR. In keeping with its signature portfolio management approach, it splits those funds into multiple sleeves, which are managed independently by distinct managers at each firm. Capital Group plans to deepen this relationship with target-date and model portfolios, as well as public/private equity funds. On the other end of the spectrum, although the firm is firmly dedicated to active management, it has also acknowledged investor preference for passive investing and has thus partnered with indexing stalwarts Vanguard, BlackRock, and Schwab on active/passive models. Capital Group’s proven investment prowess, strong reputation among investors, and scale mean it can be selective with its partnerships.

In addressing another recent trend, since early 2022, the firm has launched more than 25 active exchange-traded funds globally, most of which are distinct, but several are similar to some of its legacy American Funds mutual funds. Unlike some of its peers, though, it has not filed for SEC exemptive relief to offer ETFs as a share class.

That’s a lot of change for such a storied and sizable firm, but Capital Group has a long history of serving investors well.

The fund has delivered compelling long-term absolute and risk-adjusted returns, though its longer-duration profile has contributed to above-average volatility.

Since lead manager Mark Marinella’s first full month in January 2019, the F3 shares’ 2.3% annualized gain through October 2026 outpaced the category peer median and the Bloomberg Municipal Short Intermediate 1-10 Year Index’s respective returns of 2.0%. The strategy’s annualized information ratio, which measures excess return relative to excess standard deviation versus the benchmark, outpaced almost all category peers during the same period, indicative of an excellent risk/reward tradeoff.

Historically, the fund’s longer duration relative to short-term peers has weighed on results during interest rate selloffs. For example, as long-term yields rose in 2022, the fund’s 3.2-year duration as of March 2022 exceeded the peer median’s 2.1 years. Consequently, the fund’s 4.0% loss during the first quarter was steeper than the peer median’s 2.8% decline. Similarly, when muni yields surged across the yield curve in 2026, the fund’s 3.4% third-quarter loss was more than twice its median peer’s 1.7% decline.

The same longer duration helps the fund when yields fall, as it did in 2025. As rates eased on the heels of tariff-driven turmoil, the fund rebounded sharply and finished the year up 5.5%, well ahead of the peer median’s 4.1%.

American Funds Limited Term Tx-Ex Bd F-3's Prospectus Adjusted Expense Ratio is 0.27% per year. It places it in the second-cheapest quintile of the Morningstar US Fund Muni National Short Category, where the median fee is 0.43% per year. This cost positioning translates into a Medalist Rating Price Score of 1.42, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.