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JPMorgan Sustainable Municipal Income I HLTAX Fund Analysis

| Quantitative rating as of

Morningstar’s Analysis HLTAX

Quantitative rating as of .

The Morningstar Quantitative Rating for funds is analogous to the rating our analyst might assign to the fund if they covered it.

Our analysts assign Neutral ratings to strategies they’re not confident will outperform a relevant index, or most peers, over a market cycle.



JPMorgan Sustainable Municipal Income I boasts strong Process and People Pillar ratings, but other weaknesses hold this strategy's Morningstar Quantitative Rating at Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.

The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in debt with three- to five-year maturities and an underweight in A rated bonds compared with category peers. The management team's considerable industry experience earns it an Above Average People Pillar rating. The strategy is part of a first-rate parent, as shown by a high lineup success ratio and overall attractive fees. These attributes support its Above Average Parent Pillar rating.


| Above Average |

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. JPMorgan Sustainable Municipal Income Fd earns an Above Average Process Pillar rating.

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, over time, has displayed three biases whether toward or away from certain fixed-income instruments. First, the managers have displayed an overweight position on debt, with three- to five-year maturities relative to the average strategy in the category. Additionally, there's been a bias away from A rated bonds. And finally, the fund does not consistently lean toward or away from corporate bonds, but the current portfolio is underweight its peers.

This strategy rises above the mark with a 2.5% 12-month yield, compared with its category's average 2.2% yield. In addition, it has a 4.0% 30-day SEC yield (a measure similar to yield-to-maturity). While a higher yield may deliver more income, it also tends to indicate higher credit risk. The portfolio has a lower average surveyed credit quality of BBB, compared with the category average's A and its non-investment grade stake is 5% of assets, compared to its peers' 1%. Strategies that take on more credit risk tend to be at their best when markets are as well. This risk contributes to strong performance during bull markets at the cost of losing more on the downside.


| Above Average |

JPMorgan Sustainable Municipal Income Fd benefits from an experienced corps of managers and its longest-tenured manager, warranting an Above Average People Pillar rating. David Sivinski’s veteran status, with over 25 years of portfolio management experience, imprints a positive mark on the strategy as it brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 2.8 stars, demonstrating, in aggregate, that they provide middling value for investors. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of over 25 years of portfolio management experience.


| Above Average |

J.P. Morgan Asset Management’s strong investment culture, which shows through its long-tenured, well-aligned portfolio managers and deep analytical resources, supports a renewed Above Average Parent rating.

Across asset classes and regions, the firm's diverse lineup features many Morningstar Medalists, such as its highly regarded U.S. equity income strategy that’s available globally. There's been some turnover in the multi-asset team recently, but it remains deeply resourced and experienced. Manager retention and tenure rates, and degree of alignment for U.S. mutual funds compare favorably among the competition. Managers' compensation emphasizes fund ownership over stock ownership, which is distinctive for a public company.

The firm continues to streamline its lineup and integrate its resources further. For instance, in late 2019, the multi-asset solutions division combined with the passive capabilities. The firm hasn’t launched trendy offerings as it’s mostly expanded its passive business lately, but acquisition-related redundancies and more hazardous launches in the past weigh on its success ratio, which measures the percentage of funds that have both survived and outperformed peers. Fees are regularly reviewed downward globally; they're relatively cheaper in the U.S. than abroad. Also, the firm is building its ESG capabilities and supports distinctive initiatives on diversity.



This strategy's Institutional share class' long-term performance is mixed depending on the yardstick used. It has provided similar returns compared with peers, but subpar returns compared with the category benchmark. This share class mirrored the category average's 0.9% return over the eight-year period and its 1.2% return over a 10-year period. Despite the mixed performance against peers, it did not extend when compared with the category index, Bloomberg Barclays Municipal 1-15 Year Bond Index, where it trailed by an annualized 39 basis points over the same 10-year period.

When risk is properly accounted for, the strategy is not any more compelling. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index over the trailing 10-year period. However, this strategy stayed in line with the benchmark's standard deviation. 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.



By minimizing costs, investors can maximize their expected returns. This share class imposes a fee that positions it in its Morningstar Category's second-cheapest quintile. Despite this fee, the fund’s People, Process, and Parent Pillars suggest this share class should not be able to deliver positive alpha relative to its category benchmark, garnering a Morningstar Quantitative Rating of Neutral.