JPMorgan California Tax Free Bond R6 JCBSX

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

The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in A rated bonds and an overweight in debt with 10- to 15-year maturities compared with category peers. The longest-tenured manager's extensive experience drives the strategy's 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 California Tax Free Bond Fund earns an Above Average Process Pillar rating.

The main driver of the rating is the parent firm's five-year risk-adjusted success ratio of 57%. 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. The parent firm's impressive risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also supports 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 significantly 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 average strategy in the category, 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 overallocation to 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 2.7%, which is neck-and-neck with its average peer. It also has a 2.9% 30-day SEC yield (a measure similar to yield-to-maturity). The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

The team is backed by Michelle V. Hallam, the longest-tenured manager on the strategy, who provides 20 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, reflecting below-average risk-adjusted performance compared to category peers. Michelle V. Hallam has an experienced backdrop of support. The three listed managers boast 10 years of average listed portfolio management experience. As a team, they manage two investment vehicles together, with a Neutral asset-weighted average Morningstar Medalist Rating, indicating the team will struggle to deliver positive alpha in aggregate. 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.

Over the past three years, it mirrored the category index, the Bloomberg Barclays MF California Intermediate Municipal Bond Index, but outperformed its average peer by 22 basis points. Although more importantly, when widening the time horizon, the strategy struggled to separate itself from the pack. On a five-year basis, it matched the index.

When adjusting for risk, the fund is less favorable. The share class failed to beat the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing five-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 period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

This share class is in the cheapest quintile of its Morningstar Category. Its attractive expense ratio, taken together with the fund’s People, Process, and Parent Pillars, indicates that this share class is well-positioned to generate positive alpha against its category benchmark, leading to its Morningstar Medalist Rating of Bronze.