FRHIX
Franklin High-Yield Tax-Free Income-A1
Introduction to Franklin High-Yield Tax-Free Income-A1
The Franklin High-Yield Tax-Free Income-A1 (FRHIX) is a mutual fund designed to provide investors with a high current yield that is exempt from federal income taxes. This fund primarily invests in lower-rated or unrated municipal securities from various states, making it an attractive option for those seeking tax-free income. Managed by Franklin Templeton Investments, FRHIX falls under the category of Muni Junk Bonds, which typically offer higher yields in exchange for increased risk. With an expense ratio of 0.68%, the fund aims to deliver superior returns while maintaining a focus on municipal bonds. Investors interested in maximizing their tax-free income while accepting a higher level of risk may find this fund particularly appealing.
At A Glance
Executive Summary
FRHIX offers a high tax-free yield with a 4.47% return, focusing on lower-rated municipal bonds. It stands out with a 14.30% 1-year return and a 0.68% expense ratio.
High tax-free yield of 4.47%. Strong 1-year return of 14.30%. Focus on lower-rated municipal bonds for higher income.
Higher risk due to lower-rated bonds. Potential for volatility with a beta of 1.29. Limited sector diversification.
Impressive Recent Performance
FRHIX has demonstrated impressive performance over the past year, boasting a 1-year return of 14.30%. This performance significantly outpaces its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. The fund’s strong performance can be attributed to its strategic focus on high-yield municipal bonds, which have benefited from favorable market conditions. Despite the inherent risks associated with lower-rated bonds, FRHIX has managed to deliver robust returns, making it a compelling choice for investors seeking high tax-free income. The fund’s ability to outperform its benchmark highlights its potential for delivering superior returns in the municipal bond space.
Portfolio Composition and Top Holdings
The portfolio of FRHIX is heavily weighted towards municipal bonds, with 97.21% of its assets allocated to this sector. This focus on municipal securities is a key driver of the fund’s tax-free income strategy. The top holdings include various municipal bonds such as the San Joaquin Hills California Transportation Corridor Agency Toll Road Revenue bonds and the Puerto Rico Electric Power Authority Power Revenue bonds. These holdings reflect the fund’s strategy of investing in lower-rated municipal securities to achieve higher yields. The fund’s concentrated exposure to municipal bonds underscores its commitment to providing high tax-free income, albeit with a higher risk profile due to the nature of the underlying securities.
Risk and Volatility Considerations
Investors in FRHIX should be aware of the fund’s risk and volatility profile. With a beta of 1.29, the fund exhibits higher volatility compared to its benchmark, indicating a greater sensitivity to market movements. The fund’s standard deviation of 1.27% and a Sharpe ratio of 1.54 suggest a favorable risk-adjusted return, but the potential for volatility remains. The fund’s max drawdown of -2.5% highlights the risks associated with investing in lower-rated municipal bonds. However, the fund’s alpha of 6.78% indicates its ability to generate excess returns relative to its benchmark, suggesting that the fund’s management has been effective in navigating the risks associated with its investment strategy.
Competitive Comparison with Similar Funds
When compared to similar funds, FRHIX stands out with its high 1-year return of 14.30% and a competitive expense ratio of 0.68%. For instance, the TRPrice Tax-Free High Yield-Inv (PRFHX) and JHancock High-Yield Municipal Bond-A (JHTFX) have 1-year returns of 13.62% and 16.31%, respectively, but with slightly higher expense ratios. FRHIX’s yield of 4.47% is also competitive, offering a higher income potential compared to some peers. The fund’s focus on lower-rated municipal bonds allows it to achieve higher yields, making it an attractive option for investors willing to accept the associated risks. This competitive edge in yield and performance positions FRHIX as a strong contender in the high-yield municipal bond space.
Tax-Free Income Potential
One of the primary attractions of FRHIX is its ability to provide high tax-free income. With a yield of 4.47%, the fund offers a compelling income stream that is exempt from federal income taxes. This feature is particularly beneficial for investors in higher tax brackets who are looking to maximize their after-tax income. The fund’s focus on municipal bonds, which are generally exempt from federal taxes, enhances its appeal as a tax-efficient investment vehicle. By investing in lower-rated municipal securities, FRHIX is able to offer higher yields, making it an attractive option for income-focused investors seeking tax advantages.
Suitability for Risk-Tolerant Investors
FRHIX is best suited for investors who are comfortable with a higher level of risk in exchange for the potential of higher tax-free income. The fund’s focus on lower-rated municipal bonds means that it carries a higher risk profile compared to more conservative municipal bond funds. However, for investors who are willing to accept this risk, FRHIX offers the potential for superior returns and a high yield. The fund’s strong performance and competitive yield make it an appealing choice for those seeking to enhance their income while benefiting from tax-free returns. Investors should consider their risk tolerance and investment objectives before committing to this fund.
Conclusion: A High-Yield Tax-Free Opportunity
In conclusion, the Franklin High-Yield Tax-Free Income-A1 (FRHIX) offers a unique opportunity for investors seeking high tax-free income through municipal bonds. With a strong 1-year return of 14.30% and a competitive yield of 4.47%, the fund stands out in the high-yield municipal bond category. While the fund’s focus on lower-rated bonds introduces higher risk, its impressive performance and tax advantages make it a compelling choice for risk-tolerant investors. Those looking to maximize their tax-free income while accepting the associated risks may find FRHIX to be a valuable addition to their investment portfolio.
Similar Securities
FRHIX: Franklin High-Yield Tax-Free Income-A1 | High-Yield Tax-Free Municipal Bonds
FRHIX offers a high tax-free yield with a 4.47% return, focusing on lower-rated municipal bonds. It stands out with a 14.30% 1-year return and a 0.68% expense ratio.
ISHAX: Invesco Short-Duration High-Yield Muni-A | Tax-Exempt Income Investment
ISHAX offers a 4.05% yield with a focus on tax-exempt income, outperforming its benchmark with a 10.31% 1-year return.
MAYHX: BlackRock High-Yield Municipal-Inst | Tax-Exempt High-Yield Income
MAYHX offers high tax-exempt income with a 4.13% yield, focusing on medium- to low-quality municipal bonds. Competitive expense ratio of 0.57%.
ORNAX: Invesco Rochester Municipal Opportunity-A | High-Yield Tax-Exempt Income
ORNAX offers high-yield, tax-exempt income with a 5.16% yield, focusing on below investment grade municipal bonds, ideal for risk-tolerant investors.
AMHIX: American High-Income Municipal Bond-A | Tax-Exempt Income Investment
AMHIX offers a 3.84% yield with a focus on tax-exempt income, outperforming its benchmark with a 13.83% 1-year return and a competitive 0.66% expense ratio.
Futher Reading
https://www.morningstar.com/funds/xnas/FRHIX/quote
https://finance.yahoo.com/quote/FRHIX/”>Yahoo: Franklin High-Yield Tax-Free Income-A1
https://ftcloud.fasttrack.net/web/chart/FRHIX
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