JPMorgan National Municipal Income A JITAX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest quintile among peers.

The strategy's sensible investment philosophy merits 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 strategy's management team has a high retention rate, which helps continuity and 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 National Municipal Income Fund earns an Above Average Process Pillar rating.

The most important driver of the rating is the parent firm's five-year risk-adjusted success ratio of 59%. 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 bolsters the rating. Lastly, the process is limited by being an actively managed strategy. Historical data, like 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, historically, hews closely to peers' credit and interest-rate sensitivity. Opening the analysis to additional factors, the portfolio has displayed three 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. Additionally, there's been an overweight position in debt with 10- to 15-year maturities. And finally, the fund does not consistently lean toward or away from corporate bonds, but the current portfolio is underweight.

This strategy's 12-month yield is 2.8%, higher than its average peer's 2.6%. It also has a 3.3% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, higher yields come at the cost of higher credit risk. The portfolio has a lower average surveyed credit quality of BBB, compared with the typical peers' A and its non-investment-grade stake is 3% of assets, compared to its peers' 1%. Strategies with more credit risk may have a higher return, but they are riskier.

The team is backed by David Sivinski, the longest-tenured manager on the strategy, who brings over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.8 stars, indicating that their risk-adjusted returns have been in line with the category average. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of over 25 years of portfolio management experience. The management team has provided the fund with commendable continuity. There have been no documented departures within the past 10 years.

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 10-year period, this share class lagged its average peer by an annualized 46 basis points. It was also not able to outpace the category benchmark, Bloomberg Barclays Municipal 1-15 Year Bond Index, where it trailed by an annualized 74 basis points over the same period.

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 second-costliest quintile of its Morningstar Category. Its steep fee, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class is unlikely to deliver positive alpha against its category benchmark, leading to its Morningstar Medalist Rating of Neutral.