JPMorgan New York Tax Free Bond I JNYIX

JPMorgan New York Tax Free Bond I boasts strong People and Process Pillar ratings, but other weaknesses hold this strategy's Morningstar Quantitative Rating at Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.

The strategy has been able to retain portfolio managers, which builds stability and continuity and results in an Above Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. The portfolio has overweighted AA rated bonds and debt with 10- to 15-year maturities compared with category peers. The strategy has a solid parent that earns an Above Average Parent Pillar rating. This firm has had a favorable lineup success ratio and overall affordable fees.

Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, clearly defined, repeatable execution. JPMorgan New York Tax Free Bond Fund earns an Above Average Process Pillar rating.

Compared with other funds in the Muni New York Intermediate Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity. Opening the analysis to additional factors, the portfolio, over time, has displayed three biases whether toward or away from certain fixed-income instruments. First, managers have shown a consistent overweight position on AA rated bonds compared to peers. Additionally, there's been a bias toward 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 its peers.

This strategy has a 2.2% 12-month yield, higher than its average peer's 2.0%. It also has a 2.7% 30-day SEC yield (a measure similar to yield-to-maturity). While a higher yield may deliver more income, it also tends to indicate higher credit risk. Yet that's not the case here. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

Despite managers' lack of personal investments, JPMorgan New York Tax Free Bond Fund benefits from portfolio management stability. As the latter outweighs the former, the strategy earns an Above Average People Pillar rating. David Sivinski, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.8 stars, demonstrating, in aggregate, that they provide middling value for investors. Despite having a small team, the two listed managers boast 23 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. 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.

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of 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.

This strategy's Institutional share class has had varying fortunes. It has been successful over the short term but has been disappointing over the long term. Over the past five years, the fund matched the category index, the Bloomberg Barclays Municipal New York Tax-Exempt Bond Index, and outperformed its average peer by 36 basis points. More importantly, when looking across a longer horizon, the fund missed the mark. On a 10-year basis, this share class underperformed the index by an annualized 59 basis points.

The share class trailed the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. But notably, these subpar risk-adjusted results have not come with a rockier ride for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation.

Low-cost investments routinely outperform high-cost investments. Thus, assessing cost is a critical step in any investment evaluation. This share class charges a fee that places it in its Morningstar Category's cheapest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars indicate this share class is unlikely to deliver positive alpha relative to its category benchmark, resulting in a Morningstar Quantitative Rating of Neutral.