NYAAX
American Funds Tax-Exempt Fund of NY-A
Tax-Free Income for New York Residents
The American Funds Tax-Exempt Fund of NY-A (NYAAX) is specifically designed to provide a high level of current income that is exempt from regular federal, New York state, and New York City income taxes. This makes it an attractive option for residents of New York who are looking to maximize their after-tax income. The fund achieves this by investing at least 80% of its assets in securities that are exempt from these taxes. This focus on tax efficiency is a key feature that sets NYAAX apart from many other investment options, particularly for those in higher tax brackets who can benefit most from tax-exempt income.
At A Glance
Executive Summary
NYAAX offers tax-free income for NY residents with a 2.95% yield and a competitive 0.6% expense ratio, focusing on municipal bonds.
Tax-free income for NY residents Competitive expense ratio Strong correlation with benchmark
Limited to NY municipal bonds Lower yield compared to peers Potential interest rate risk
Performance in the Municipal Bond Sector
NYAAX has demonstrated a solid performance within the municipal bond sector, with a one-year return of 9.03%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This performance is indicative of the fund’s effective management and strategic allocation within the municipal bond market. The fund’s focus on New York municipal bonds allows it to capitalize on local market opportunities, which can be advantageous in terms of yield and risk management. However, its longer-term returns, such as the ten-year annualized return of 2.11%, suggest a more modest performance over extended periods, which is typical for funds in this category.
Risk Metrics and Volatility
The risk profile of NYAAX is characterized by a beta of 1.20, indicating a higher sensitivity to market movements compared to its benchmark. Despite this, the fund has managed to maintain a relatively low standard deviation of 1.13%, suggesting that it experiences less volatility than might be expected given its beta. The fund’s alpha of 1.52% reflects its ability to generate returns above the expected level based on its risk, which is a positive indicator for potential investors. Additionally, the fund’s Sharpe ratio of 0.39 and Treynor ratio of 1.26 further highlight its risk-adjusted performance, making it a potentially attractive option for investors seeking a balance between risk and return.
Portfolio Composition and Top Holdings
NYAAX’s portfolio is heavily weighted towards municipal bonds, with 98.72% of its assets allocated to this sector. This concentration reflects the fund’s objective of providing tax-exempt income. The top holdings include significant allocations to New York-based municipal securities, such as the Triborough Bridge & Tunnel Authority and the New York City Transitional Finance Authority. These holdings are indicative of the fund’s strategy to invest in high-quality, revenue-generating municipal projects that offer stable income streams. The fund’s minimal allocation to cash and other assets (1.28%) suggests a focus on maintaining full investment in income-generating securities, which aligns with its income-oriented strategy.
Competitive Expense Ratio and Yield
With an expense ratio of 0.6%, NYAAX offers a competitive cost structure compared to other funds in the municipal bond category. This low expense ratio is particularly beneficial for investors seeking to maximize their net returns, as lower costs can significantly enhance overall performance over time. The fund’s yield of 2.95% is attractive for those looking for steady income, although it is slightly lower than some of its peers, such as the MFS Municipal High Income-A (MMHYX), which offers a yield of 4.21%. Nonetheless, the tax-exempt nature of NYAAX’s yield can provide a compelling advantage for New York residents in higher tax brackets.
Comparison with Similar Funds
When compared to similar funds, NYAAX holds its ground with a strong focus on New York municipal bonds. For instance, while the Colorado BondShares A Tax-Exempt (HICOX) and MFS Municipal High Income-A (MMHYX) offer higher yields, NYAAX’s tax-exempt status for New York residents provides a unique benefit that these funds do not. Additionally, NYAAX’s expense ratio is competitive, though slightly higher than some peers. The fund’s beta of 1.20 is higher than the beta of its peers, indicating a potentially higher risk, but its strong correlation with the benchmark (98.47%) suggests that it closely tracks the performance of the municipal bond market, providing a level of predictability for investors.
Suitability for Risk-Averse Investors
NYAAX is particularly suitable for risk-averse investors who are residents of New York and are seeking tax-exempt income. The fund’s focus on municipal bonds, which are generally considered to be lower risk compared to other fixed-income securities, aligns well with the needs of conservative investors. The fund’s relatively low standard deviation and strong correlation with its benchmark further enhance its appeal to those looking for stability and predictability in their investment returns. However, potential investors should be aware of the interest rate risk associated with long-term bonds, as rising rates could negatively impact the fund’s performance.
Conclusion: A Strategic Choice for New York Investors
In conclusion, the American Funds Tax-Exempt Fund of NY-A (NYAAX) stands out as a strategic choice for New York residents seeking tax-free income. Its focus on municipal bonds provides a stable income stream, while its competitive expense ratio enhances its appeal. Although its yield is slightly lower than some peers, the tax-exempt nature of its income offers a significant advantage for those in higher tax brackets. The fund’s strong correlation with its benchmark and its effective risk management make it a reliable option for conservative investors. Overall, NYAAX is well-suited for those prioritizing tax efficiency and income stability in their investment portfolios.
Similar Securities
GTFBX: TRPrice GA Tax-Free Bond-Inv | Tax-Exempt Income from Georgia Bonds
GTFBX offers tax-free income with a 3.25% yield, focusing on Georgia municipal bonds. It has a competitive expense ratio of 0.56% and strong risk metrics.
FRORX: Franklin OR Tax-Free Income-A1 | Tax-Exempt Income for Oregon Residents
FRORX offers tax-exempt income for Oregon residents with a 3.17% yield and a competitive 0.67% expense ratio, focusing on municipal bonds.
MANKX: BlackRock NY Municipal Opportunity-Inst | Tax-Exempt Income for NY Investors
MANKX offers a 3.33% yield with tax-exempt income, outperforming its benchmark with a 1-year return of 8.92%.
PCTEX: Putnam CA Tax-Exempt Income-A | Tax-Free Income for California Investors
PCTEX offers a 3.17% yield with tax-free income, a competitive expense ratio, and strong California municipal bond focus.
PRINX: TRPrice Summit Municipal Income-Inv | Tax-Exempt Income Fund
PRINX offers a 3.23% yield with a low 0.5% expense ratio, focusing on investment-grade municipal bonds for tax-exempt income.
Futher Reading
https://www.morningstar.com/funds/xnas/NYAAX/quote
https://finance.yahoo.com/quote/NYAAX/”>Yahoo: American Funds Tax-Exempt Fund of NY-A
https://ftcloud.fasttrack.net/web/chart/NYAAX
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