American Funds Tax-Exempt Preservation Portfolio Class C TEPCX

American Funds Tax-Aware Preservation and Income series’ strong management team and thoughtful, research-based approach help it stand out among peers. It remains a great choice for tax-conscious investors. The series’ three portfolios are available as model portfolios and separate accounts, with the Tax-Exempt Preservation portfolio also offered as a mutual fund.

This series is guided by the portfolio solutions committee, a capable crew of seven portfolio managers with expertise in multi-asset, equity, and fixed-income investing. Multi-asset manager Samir Mathur has chaired the committee since its formation in 2020, and the management team holds an average of 31 years of industry experience, many with long tenures at Capital Group. A 17-person analyst team from the capital solutions group supports the committee. The team started with just three analysts after the 2020 revamp, and the firm continues to thoughtfully invest in its growth.

The series aims to provide aftertax income and preservation of capital. In line with the series’ objective, the fixed-income exposure is built with municipal-bond funds to produce tax-exempt income. The income mandate and conservative posture of the series tilt the equity allocations toward large, established dividend-paying companies. While investors will be exposed to taxable income through dividends, the team is mindful to pick naturally lower-yielding equity funds instead of higher-yielding equity-income funds.

The team has evolved the underlying fund lineup over the past few years in a bid for more tax efficiency. It added eight Capital Group exchange-traded funds from 2023 to 2025, replacing or reducing American Funds strategies; two of the three portfolios in this series now invest entirely in ETFs. ETFs typically hold a tax advantage over mutual funds because they can provide in-kind redemptions and don’t need to pay out capital gains, so the addition of the ETFs here should help boost the series’ tax efficiency. Investors in taxable accounts may have owed taxes when the team reduced or removed American Funds strategies with embedded capital gains, but the team thoughtfully spread the transition out across three years to reduce the potential impact in any single year.

This thorough, research-based approach culminates in thoughtfully built tax-aware portfolios. The series earns an Above Average Process Pillar rating.

This series comes in three flavors: Tax-Aware Moderate Income (40% equity/60% fixed income), Tax-Aware Conservative Income (20%/80%), and Tax-Exempt Preservation (0%/100%). These portfolios are built for investors seeking aftertax income and capital preservation. The series primarily uses municipal-bond funds for its fixed-income holdings rather than taxable-bond funds to help ease the tax burden on investors. In line with these portfolios’ conservative nature, the equity sleeve is more defensive and steeped in established large-cap companies. It also tilts toward value stocks rather than typically more volatile growth stocks.

A unique, objectives-based approach informs asset allocation decisions. Unlike many peers who allocate to a specific level of risk, the managers here allocate to the different roles equity and fixed income play in a portfolio, such as “growth” (growth stocks) and “tax-exempt income” (municipal bonds), to build this series. The group’s optimization model guides asset allocation and fund selection based on these portfolio objectives and the firm’s capital market assumptions. The team then carries out its own quantitative and qualitative analysis to determine the final strategic allocations and manager selection.

Management is mostly hands-off but revisits the allocations at least annually and will adjust occasionally. The series has evolved over the past few years, with the addition of eight Capital Group ETFs to the lineup; one in September 2023 (Capital Group Dividend Value ETF), three in July 2024 (Capital Group Short Duration Income ETF, Municipal Income ETF, and Dividend Growers ETF), and four in August 2025 (Capital Group Global Equity ETF, Capital Group Core Equity ETF, Capital Group Conservative Equity ETF, and Capital Group Municipal High-Income ETF). The ETFs either replaced or lowered exposure to existing American Funds strategies, with the Tax-Exempt Preservation portfolio the only one in the series still holding American Funds mutual funds. ETFs are typically more tax-advantaged than mutual funds, so this move should bolster the series’ tax efficiency. While none of the Capital Group ETFs clones any American Funds strategies, there weren’t significant shifts in sub-asset-class exposures.

The team relies on the flexibility of the actively managed underlying funds to drive sub-asset-class allocations. For example, the series does not hold any dedicated non-US equity exposure, instead allocating to the global stock fund Capital Group Global Equity ETF, which has leeway to invest in opportunities around the globe. Allowing the underlying managers to use their expertise in bottom-up analysis plays to the firm’s strengths in that area.

This series’ topnotch management team, deep analyst bench, and strong lineup of underlying funds underpin its High People Pillar rating.

Capital Group’s multi-asset resources have quickly strengthened and grown since the team’s 2020 revamp. At that time, the portfolio solutions committee, which oversees this series, began focusing its efforts on the firm’s fund-of-funds strategies. Samir Mathur, a multi-asset portfolio manager, chairs the committee. Six other portfolio managers, each with at least 26 years of industry experience, join him. The comanagers bring unique asset-class expertise, with two specializing in multi-asset, two in equities, and two in fixed income. This cross-asset collaboration between the seven managers allows for different perspectives to surface and leads to robust oversight of the portfolios.

The capital solutions group provides research and allocation support to the committee. The analyst team has more than quintupled in size since 2020, to 17 analysts from three. They support the day-to-day monitoring of allocations, ongoing research, and coverage of underlying funds. Analyst and research director Glenn Cagan works the closest with this series and plays a key role in ongoing research.

The series holds a strong lineup of underlying funds, with all funds used across the series earning a Morningstar Medalist Rating of Bronze, Silver, or Gold as of July 2026.

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.

This series holds a solid track record. The Tax-Exempt Preservation portfolio has the longest track record of the three portfolios, launching as a mutual fund in May 2012. Since then, through May 2026, the F3 share class’ 2.1% annualized gain topped the muni-national short Morningstar Category average of 1.2% and the Bloomberg Municipal 3-Year (2-4) Index’s 1.4% return. Risk-adjusted results also impressed with a Sharpe ratio that bested 96% of peers. Strong issue selection in the underlying municipal-bond funds and longer duration than peers over the period contributed to outperformance. The longer duration did hurt the strategy in 2022, though, when the Federal Reserve’s rapid rate hikes contributed to stock and bond market declines. Its 4% loss for the year ranked near the worst quartile in the category.

The Tax-Aware Conservative Income and Moderate Income portfolios were introduced in September 2019. Both have notched top-quartile returns in their respective moderately conservative and conservative-allocation categories since inception. They also outperformed the typical rival and category benchmarks on a risk-adjusted basis, measured by the Sharpe ratio, over the period. Municipal bonds occupy nearly all of each portfolio’s bond sleeve, and munis have generally outperformed taxable bonds over the period, which has helped boost performance versus category peers who may have broader bond allocations.

American Funds Tax-Exempt Presv Port C's Prospectus Adjusted Expense Ratio is 1.3% per year. It places it in the most expensive quintile of the Morningstar US Fund Muni National Short Category, where the median fee is 0.43% per year. This cost positioning translates into a Medalist Rating Price Score of -2.08, 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.