JPMorgan Tax Aware Real Return A TXRAX

Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest 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 BBB rated bonds and an overweight in debt with 10- to 15-year maturities compared with category peers. The management team's considerable industry experience earns it an 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 Aware Real Return Fund earns an Above Average Process Pillar rating.

The most important driver of the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. Impressive risk-adjusted performance also bolsters the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the number of months that the management team has been running this vehicle together.

Compared with other funds in the Muni National Interm 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 BBB rated bonds in recent years. In the latest month, the strategy has also relatively underweighted BBB rated bonds compared with Morningstar Category peers. Additionally, there's been an overallocation to debt with 10- to 15-year maturities over the past few years. Compared with category peers, the strategy had more exposure to debt with 10- to 15-year maturities in the most recent month. Finally, during the past few years, the fund leaned meaningfully towards cash. In this month, the strategy also leaned more towards cash compared with its peers.

This strategy's 12-month yield is 3.1%, which is near its average peer. Plus, it has a 2.9% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). 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. The portfolio managers' outperformance at the funds they run, as measured by their combined three-year manager excess returns, also contributes to the rating. Lastly, the rating is limited by the turnover 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.

David P. Rooney, the longest-tenured manager on the strategy, provides strong guidance, offering over 25 years of listed portfolio management experience. David P. Rooney has an experienced backdrop of support. The three listed managers boast 16 years of average listed portfolio management experience. 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.

It has provided better returns compared with peers, but mixed returns compared with the category benchmark. Over a 10-year period, this share class outperformed the category’s average return by 84 basis points annualized. However, it had a mixed track record compared with the category benchmark, Bloomberg Barclays Municipal 1-15 Year Bond Index, where it outperformed the index by 41 basis points over an eight-year period and fell short of the category benchmark by 44 basis points over the 10-year period. One-year performance does not largely affect this share class' rating. However, its impressive 4.4% return is worth mentioning, a 1.3-percentage-point lead over its average peer, placing it within the top 10% of its category.

When adjusting for risk, the fund is not shown in a favorable light. The share class failed to beat the index with a lower Sharpe ratio, a measure of risk-adjusted returns, over the trailing 10-year period. This subpar risk-adjusted performance has not resulted in higher volatility, as measured by their standard deviation, which is close to the benchmark. 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-costliest quintile of its Morningstar Category. Its steep expense ratio, paired with the fund’s People, Process, and Parent Pillars, suggests that this share class is unlikely to deliver positive alpha compared with its category benchmark, leading to its Morningstar Medalist Rating of Neutral.