FCAMX
Franklin CA High-Yield Municipal-A1
Tax-Exempt Income for California Residents
The Franklin CA High-Yield Municipal-A1 (FCAMX) is designed to provide investors with a high level of income that is exempt from both federal and California state personal income taxes. This makes it particularly attractive for California residents who are in higher tax brackets and looking to maximize their after-tax income. The fund’s focus on municipal bonds issued within California allows it to offer a yield of 4.06%, which is competitive within the municipal bond category. This tax-exempt feature is a significant advantage for investors seeking to reduce their tax liabilities while maintaining a steady income stream.
At A Glance
Executive Summary
FCAMX offers a 4.06% yield with tax-exempt income, outperforming its benchmark with a 1-year return of 11.50%.
High yield of 4.06% tax-exempt income. Strong 1-year return of 11.50%. Focus on California municipal bonds.
Higher expense ratio of 0.69%. Negative 3-year return of -0.97%. Limited diversification outside California.
Impressive Recent Performance
FCAMX has demonstrated impressive performance over the past year, with a 1-year return of 11.50%, significantly outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This strong performance can be attributed to the fund’s strategic allocation in high-yield municipal bonds, which have benefited from favorable market conditions and interest rate environments. The fund’s ability to deliver such returns highlights its potential for capital appreciation alongside income generation, making it an appealing choice for investors seeking both growth and income.
Portfolio Composition and Top Holdings
The fund’s portfolio is heavily weighted towards municipal bonds, with 97.52% of its assets allocated to this sector. This focus on municipal bonds is consistent with the fund’s objective of providing tax-exempt income. The top holdings include bonds from the San Joaquin Hills California Transportation Corridor Agency and the San Francisco City & County Public Utilities Commission, among others. These holdings are selected for their credit quality and yield potential, contributing to the fund’s overall performance. The concentration in California municipal bonds also aligns with the fund’s strategy to capitalize on the state’s economic stability and growth prospects.
Risk Metrics and Volatility
FCAMX exhibits a relatively low level of volatility, with a standard deviation of 1.15% and a beta of 1.19, indicating that it is slightly more volatile than the market. The fund’s alpha of 3.98% suggests that it has outperformed its benchmark on a risk-adjusted basis. Additionally, the Sharpe ratio of 1.00 and Treynor ratio of 3.34 indicate that the fund has been effective in generating returns relative to its risk. The downside risk, measured by the Ulcer Index, is low at 0.77, reflecting the fund’s ability to manage potential losses effectively. These metrics underscore the fund’s potential for delivering consistent returns while managing risk.
Comparative Analysis with Similar Funds
When compared to similar funds, FCAMX holds its ground with a competitive yield and strong recent performance. For instance, while the TRPrice Tax-Free High Yield-Inv (PRFHX) offers a higher 1-year return of 13.62%, FCAMX’s yield of 4.06% is more attractive than PRFHX’s 3.67%. Additionally, FCAMX’s focus on California municipal bonds provides a unique advantage for investors in the state, unlike other funds such as Dupree NC Tax-Free Income (NTFIX) and JHancock High-Yield Municipal Bond-A (JHTFX), which have broader geographic exposures. This makes FCAMX a compelling option for those specifically seeking California tax-exempt income.
Expense Ratio and Cost Considerations
The expense ratio of FCAMX stands at 0.69%, which is relatively higher compared to some of its peers. For example, the Eaton Vance National Ltd MaturMuni Inc-A (EXNAX) has a lower expense ratio of 0.68%. While the higher expense ratio may be a consideration for cost-conscious investors, it is important to weigh this against the fund’s strong performance and tax-exempt income benefits. The fund’s ability to deliver a high yield and outperform its benchmark may justify the higher costs for investors who prioritize income and performance over expense minimization.
Suitability for Income-Focused Investors
FCAMX is particularly well-suited for income-focused investors, especially those residing in California. The fund’s emphasis on high-yield municipal bonds provides a steady stream of tax-exempt income, which is ideal for investors seeking to enhance their after-tax returns. The fund’s strong recent performance and strategic focus on California bonds make it an attractive option for those looking to capitalize on the state’s economic growth while minimizing tax liabilities. However, investors should consider the fund’s higher expense ratio and limited diversification outside California when evaluating its suitability for their portfolios.
Conclusion: A Strategic Choice for California Investors
In conclusion, the Franklin CA High-Yield Municipal-A1 (FCAMX) stands out as a strategic choice for California investors seeking tax-exempt income. With a competitive yield of 4.06% and a strong 1-year return of 11.50%, the fund offers both income and growth potential. Its focus on California municipal bonds provides a unique advantage for residents of the state, allowing them to benefit from local economic stability and growth. While the fund’s higher expense ratio and limited geographic diversification may be considerations, its overall performance and tax benefits make it a compelling option for income-focused investors in California.
Similar Securities
TAFTX: American Funds Tax-Exempt Fund of CA-A | Tax-Free Income Investment
TAFTX offers tax-free income with a 2.88% yield, focusing on California municipal bonds. It has a competitive expense ratio of 0.57%.
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.
OPCAX: Invesco CA Muni-A | Tax-Exempt Income for California Investors
OPCAX offers a 3.80% yield with tax-exempt income, focusing on California municipal bonds. It has a high correlation with its benchmark and a 1.18% expense ratio.
PTAEX: Putnam Tax-Exempt Income-A | Tax-Free Municipal Bond Investment
PTAEX offers tax-free income with a 3.19% yield and a focus on investment-grade municipal bonds, ideal for risk-averse investors.
FNYTX: Franklin NY Tax-Free Income-A1 | Tax-Exempt Income for NY Investors
FNYTX offers tax-free income for NY residents with a 3.24% yield and a competitive 0.6% expense ratio, focusing on municipal bonds.
Futher Reading
https://finance.yahoo.com/quote/FCAMX/”>Yahoo: Franklin CA High-Yield Municipal-A1
https://ftcloud.fasttrack.net/web/chart/FCAMX
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