JPMorgan Short-Interm Muncpl Bd C STMCX

JPMorgan Short-Interm Muncpl Bd C boasts strong People and Process Pillar ratings, but other weaknesses hold this strategy's Morningstar Quantitative Rating at Negative. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the most expensive 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 underweighted AAA rated bonds and debt with 20- to 30-year maturities compared with category peers. The strategy belongs to a strong asset-management firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a high lineup success ratio and overall affordable fees.

Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. JPMorgan Short-Intermediate Muncpl Bd Fd earns an Above Average Process Pillar rating.

Compared with other funds in the Muni National Short 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 underweight position on AAA rated bonds compared to peers. Additionally, there's been a bias away from debt with 20- to 30-year maturities. And finally, the fund does not consistently lean toward or away from corporate debt, but the current portfolio is underweight its peers.

This strategy has a modest 0.8% 12-month yield, lower than its average peer's 1.1%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 1.8%. A lower yield tends to indicate lower 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 Short-Intermediate Muncpl Bd Fd benefits from portfolio management stability. As the latter outweighs the former, the strategy earns an Above Average People Pillar rating. Kevin M. Ellis, the longest-tenured manager on the strategy, boasts 18 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.6 stars, demonstrating discouraging risk-adjusted performance. Kevin M. Ellis has an experienced listed co-manager. Together, they average 17 years of portfolio management experience. The team has successfully retained portfolio-manager talent, providing continuity for strategies as long-term stability tends to support positive results. There have been no documented departures within the past 10 years. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

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.

Performance-wise, this strategy’s C share class, with returns reported in US Dollar, has demonstrated it is weak over a full market cycle, with inferior returns compared with peers and when adjusted for risk. The share class failed to beat the category index, Bloomberg Barclays Municipal 3 Year 2-4 Year Maturity Bond Index, with a lower Sharpe ratio, a measure of risk-adjusted returns, 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 period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

The fund continues to have a disappointing track record viewed through the lens of long-term absolute returns. The share class underperformed the category index by an annualized 1.0 percentage point over the past 10 years. And comparing it against category peers does not paint a brighter picture. Specifically, the strategy trailed its average peer by an annualized 72 basis points for the same 10-year period. Although one-year performance does not factor heavily in the overall rating, it is worth mentioning that this share class lost 5.7%, a sizable 3.1-percentage-point loss over its average peer, placing it within the bottom 10% of its category group.

Returns vary from period to period, but expenses are always deducted. It is good practice to weigh them heavily in any investment evaluation. This share class is within the costliest quintile of its Morningstar Category. Its high expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, suggests that this share class could have materially negative alpha compared with its category benchmark, leading to its Morningstar Quantitative Rating of Negative.