JPMorgan Tax Aware Real Return C TXRCX

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 management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy's effective investment approach earns 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 has an overweight in debt with 10- to 15-year maturities compared with category peers. 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 main driver of the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 57% also strengthens the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

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. Compared with the average strategy in the category, 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 2.5%, lower than its average peers' 2.8%. In addition, it has a 2.3% 30-day SEC yield (a measure similar to yield-to-maturity). While a lower yield may deliver less income, it also tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower 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 largest contributor to the rating is its parent firm's five-year success ratio of 57%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The combined average five-year excess return of each manager also bolsters the rating. It implies that the funds they manage have exceeded the average manager. Lastly, the rating is limited by the parent firm's five-year retention rate of 81%, which suggests it could do more to retain its portfolio managers.

The team is backed by David P. Rooney, the longest-tenured manager on the strategy, who brings over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.2 stars, demonstrating average risk-adjusted performance. David P. Rooney has an experienced backdrop of support. The three listed managers boast 21 years of average listed portfolio management experience. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

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.

The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the category index, Bloomberg Barclays Municipal 1-15 Year Bond 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 period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

The long-term absolute return record of the strategy is more of a mixed bag. The share class underperformed the category index by an annualized 1.2 percentage points over the past 10 years. However, it has come out ahead of its peers, leading the average by an annualized 15 basis points over the same 10-year period. One-year performance does not largely affect the share class' rating. However, its 4.0% return is worth mentioning, undershooting its average peer by 1.1 percentage points and placing it within the bottom 10% of its peer group.

This share class lands in the costliest quintile of its Morningstar Category. Its pricey fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class could struggle to deliver positive alpha versus its category benchmark, leading to its Morningstar Medalist Rating of Neutral.