JPMorgan Tax Free Bond I PRBIX

The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest 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 cash 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 Tax Free Bond Fund earns an Above Average Process Pillar rating.

The leading factor in the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The parent firm's five-year risk-adjusted success ratio of 55% also influences the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their respectable success ratio suggests that the firm does well for investors and that this fund may benefit from that.

Compared with other funds in the Muni National Long 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 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, the fund has exhibited a notable sector bias towards cash over the past few years. Compared with category peers, the strategy had more exposure to cash in the most recent month. Finally, during the past few years, the fund leaned meaningfully towards debt with 15- to 20-year maturities. In this month, the strategy also leaned more towards debt with 15- to 20-year maturities compared with its peers.

This strategy's 12-month yield is 3.8%, higher than its average peer's 3.4%. Plus, its 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return) sits at 3.6%. 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 main contributor to the rating is its parent firm's five-year success ratio of 55%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. Management team experience, which averages 10 years at this fund, also supports the rating. Lastly, the rating is limited by the instability of its management team. The fund last saw a manager change three months ago, which suggests that it could do more to retain its portfolio managers.

None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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' 1.9% return was about even with the average peer's performance. It trailed the category benchmark, Bloomberg Barclays Municipal Bond Index, by an annualized 30 basis points over the same period.

Even when adjusting for risk, the fund does not hold up. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index over the trailing 10-year period. However, this strategy hewed close to the benchmark's standard deviation. 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 is in the second-cheapest quintile of its Morningstar Category. Its attractive expense ratio, paired with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha compared with its category benchmark, explaining its Morningstar Medalist Rating of Bronze.