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 overweight AA rated bonds and debt with 10- to 15-year maturities compared with category peers. The strategy belongs to a strong firm that earns an Above Average Parent Pillar rating. The firm, for example, has had a favorable lineup success ratio and overall affordable fees.

JPMorgan Tax Aware Real Return Fund earns an Above Average Process Pillar rating.

The main contributor to the rating is the fund's excellent 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 59% also strengthens the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their impressive 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, historically, hews closely to peers' credit and interest-rate sensitivity. Opening the analysis to additional factors, the portfolio has displayed three biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been overweight AA rated bonds. Additionally, there's been an overallocation to debt with 10- to 15-year maturities. And finally, the fund leans meaningfully toward cash.

This strategy's 12-month yield is 2.1%, lower than its average peers' 2.6%. It also has a 2.4% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, a lower yield comes with the benefit of less 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.

Richard D. Taormina, the longest-tenured manager on the strategy, boasts over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.8 stars, reflecting below-average risk-adjusted performance versus category peers. Richard D. Taormina has an experienced listed co-manager. Together, they average over 30 years of portfolio management experience.

Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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 similar returns compared with peers, but poor returns compared with the category benchmark. Over a 10-year period, this share class' 1.1% gain mirrored the category's average return. Despite the neck-and-neck performance against its peers, it did not extend when compared to the category index, Bloomberg Barclays Municipal 1-15 Year Bond Index, where it trailed by an annualized 1.3 percentage points over the same period. Although one-year performance does not factor heavily in the overall rating, it is worth mentioning that this share class lost 0.9%, a sizable 1.3-percentage-point loss over its average peer, placing it within the bottom 10% of its category group.

When adjusting for risk, this fund is not compelling. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index 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.

This share class is within the costliest quintile of its Morningstar Category. Its unattractive fee, considered jointly with the fund’s People, Process, and Parent Pillars, indicates that this share class could struggle to deliver positive alpha relative to its category benchmark, leading to its Morningstar Medalist Rating of Neutral.