American Funds Tax-Exempt Fund of California® Class A TAFTX

American Funds Tax-Exempt Fund of California stands out for its deep municipal research capabilities, disciplined succession planning, and flexible approach to finding relative value in the California muni bond market.

Capital Group’s experienced muni team was well-equipped to handle a shift in portfolio management responsibilities in 2025. The firm named Ivan Mirabelli as this strategy’s principal investment officer in October 2025, after longtime PIO Karl Zeile came off this fund. Zeile remains at Capital Group and now focuses on his PIO responsibilities on American Funds Tax Exempt Bond. Mirabelli has managed a portfolio sleeve since October 2024, but he had spent nearly a decade at the firm as a research analyst. Mirabelli works alongside investment-grade muni expert Mark Marinella, who has managed this fund since 2018. The managers draw support from one of the top muni teams in the industry. Ten muni credit analysts, six dedicated traders, and the firm’s risk and quantitative group sharpen the managers’ ability to source bonds, assess relative value, and monitor portfolio risk.

Consistent with Capital Group’s taxable strategies, this team uses a multimanager structure in which each of the fund’s two named managers runs a separate portfolio sleeve, while the analyst bench collectively manages the rest. This setup allows each to lean into their areas of expertise and express high-conviction views, while Mirabelli coordinates overall risk exposures and portfolio positioning to keep the strategy aligned with its mandate. The team favors revenue bonds backed by durable cash flows, including special tax, corporate-backed, transportation, healthcare, and housing bonds, and they have long found less value in California general-obligation debt. The team avoids leverage, limiting a potential source of volatility, but has the flexibility to add up to 10% in below-investment-grade (including nonrated bonds) when valuations look attractive.

The strategy’s results have been competitive. Its 1.2% and 2.4% annualized gain over the trailing five- and 10-year periods through April 2026 outperformed the Bloomberg California Municipal Index by 36 and 24 basis points, respectively, while its information ratio (a measure of excess return over excess standard deviation versus the benchmark) topped almost all muni California long Morningstar Category distinct peers. It remains a strong muni option for California-based investors.

The team’s rigorous fundamental research and strong coordination support a repeatable, risk-aware process that consistently surfaces and acts on its best ideas; it earns a High Process rating.

Capital Group’s multimanager system gives the two managers discretion over buy, sell, and sizing decisions when constructing their individual sleeves, while muni credit analysts run a third sleeve that leans more into sectors where they see better opportunities than the Bloomberg California Municipal Index. PIO Ivan Mirabelli oversees the strategy and ensures the overall portfolio exposures remain balanced and aligned with the investment parameters. The firm’s risk and quantitative group, led by Chris Brune, adds another layer of oversight, while analysts and traders support portfolio construction by helping the team assess relative value and source bonds.

The firm's broad fixed-income research capabilities give this team a meaningful edge in sourcing bonds and assessing relative value. The managers act quickly when opportunities arise thanks to access to proprietary data and coordinated trading support. Even so, several long-standing preferences provide consistency. The portfolio favors revenue bonds with strong, consistent cash streams; special tax, corporate-backed, and transportation revenue bonds remain significant sectors here. The team also avoids leverage, limiting a potential source of volatility. At the same time, thorough bottom-up research allows the managers to add low-rated and nonrated bonds when valuations look attractive. This value-conscious approach, supported by deep credit research, has helped the strategy avoid larger drawdowns in weak markets while still keeping pace when muni markets rebound.

The portfolio’s duration positioning reflects a deliberate balance between pursuing long-term outperformance and limiting interest rate risk. They typically keep the fund's duration (a measure of interest rate sensitivity) modestly longer than its index, which can support excess returns over time, while staying shorter than the long California muni category median. Its 6.8-year duration as of December 2025 stood 0.5 years longer than the index but 1.5 years shorter than the peer median.

Focused on opportunities in the California muni market, this mostly investment-grade portfolio holds substantial weightings in revenue-backed bonds (78% of assets as of December 2025) along with a roughly 17% stake in GO debt, a significant underweighting relative to the Bloomberg California Municipal Index’s 34% allocation. The managers have long argued GO bonds issued by the state of California offer less attractive valuations than bonds backed by special taxes (roughly 24%), corporate-backed munis (12%), and transportation (9%) revenue bonds.

The managers continue to find attractive opportunities in the housing sector, particularly in planned amortization class bonds. Over the trailing five years ended December 2025, the team kept overall housing exposure between 6% and 10%, with the year-end stake marking the high end of that range and sitting roughly 8 percentage points above the index’s 1.5%.

Strong muni debt expertise, rigorous firmwide research capabilities, and Capital Group’s multimanager system together allow this seasoned team to focus on what it does best; it earns a High People rating.

Capital Group’s experienced muni team was well-equipped to handle a shift in portfolio management responsibilities in 2025. The firm named Ivan Mirabelli as PIO in October 2025 as the firm removed former PIO Karl Zeile from the fund. Zeile remains at the firm and now focuses on his responsibilities as PIO on American Funds Tax Exempt Bond. Mirabelli was first named on this fund in October 2024, bringing over a decade of industry experience, and has covered several municipal sectors as an analyst at the firm, including electrical utilities, tax assessment, and tax allocation. Mirabelli collaborates with investment-grade muni expert Mark Marinella, who brings roughly four decades of industry experience; he has managed a portfolio sleeve since 2018.

Capital Group’s multimanager system further enhances the managers’ work. The structure divides the fund's assets among the two named managers (40% of assets each) and the analyst-led research portfolio (20%); each runs a sleeve aligned with their background and areas of expertise while drawing heavily on the firm's strong fixed-income research and trading capabilities. Ten muni credit analysts and six dedicated traders strengthen the effort and add another layer of insight while the firm’s risk and quantitative group collaborates closely with the managers for risk management.

Manager ownership, which reflects alignment with investors, is reasonable. Both Mirabelli and Marinella invest between USD 100,001 and USD 500,000.

Capital Group stands out from the pack as it enhances capabilities around strong core competencies. It earns a High Parent rating.

Since 1931, Capital Group, parent of American Funds, has thoughtfully built out capabilities to become one of the world’s largest asset managers, managing more than USD 3 trillion dollars. Building on the success of its long-term-oriented, multiple-manager system for global equities, the firm has developed robust fixed-income and multi-asset units, each managing more than USD 500 billion. In January 2026, as part of its periodic review of its now five distinct research organizations, Capital Group implemented changes to its equity investment subsidiaries. This exercise resulted in most equity strategies having at least one portfolio manager change, but according to the firm, it better balances each of Capital Group’s three equity groups in terms of investment breadth and helps the firm better align leadership opportunities across the groups. These kinds of shifts have occurred before, with the last coming in 2018.

Capital Group has also turned its attention to some modern opportunities. To address public/private market convergence trends, it launched in April 2025 two semiliquid funds with private market giant KKR. In keeping with its signature portfolio management approach, it splits those funds into multiple sleeves, which are managed independently by distinct managers at each firm. Capital Group plans to deepen this relationship with target-date and model portfolios, as well as public/private equity funds. On the other end of the spectrum, although the firm is firmly dedicated to active management, it has also acknowledged investor preference for passive investing and has thus partnered with indexing stalwarts Vanguard, BlackRock, and Schwab on active/passive models. Capital Group’s proven investment prowess, strong reputation among investors, and scale mean it can be selective with its partnerships.

In addressing another recent trend, since early 2022, the firm has launched more than 25 active exchange-traded funds globally, most of which are distinct, but several are similar to some of its legacy American Funds mutual funds. Unlike some of its peers, though, it has not filed for SEC exemptive relief to offer ETFs as a share class.

That’s a lot of change for such a storied and sizable firm, but Capital Group has a long history of serving investors well.

The strategy’s value-conscious approach and measured interest rate risk profile have produced competitive volatility-adjusted results.

The fund has delivered strong results over principal investment officer Ivan Mirabelli’s short tenure on the fund. Since October 2024, Mirabelli’s first full month running a portfolio sleeve as a named manager, the F3 share class’ 2.4% annualized return through April 2026 outpaced the distinct muni California long category median's 1.9% and the Bloomberg California Municipal Index’s 2.3%. Its annualized information ratio topped almost all peers during the same period.

Historically, this fund has kept its duration shorter than the peer median, which has helped during rate-driven selloffs. For example, its 6.3-year duration in early 2022 was among the category’s shortest. During that calendar year, as long-term yields rose sharply, the fund's 9% loss, while substantial, was less severe than the category peer median’s 10.4% drop. That same profile, aided by the fund’s investment-grade focus, also helped during March 2020’s muni-market selloff. The strategy’s 4.1% decline was less severe than the peer median’s 5.4% loss.

In 2025, the fund’s overweighting in special tax and housing revenue bonds continued to support performance relative to the index, though security selection within the special tax and education sectors muted results slightly. The fund’s 4.0% gain trailed the index’s 4.1% but outpaced the peer median of 3.0%.

American Funds Tax-Exempt Fund of CA A's Prospectus Adjusted Expense Ratio is 0.56% per year. It places it in the middle quintile of the Morningstar US Fund Muni California Long Category, where the median fee is 0.58% per year. This cost positioning translates into a Medalist Rating Price Score of 0.12, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.