FRPAX
Franklin PA Tax-Free Income-A1
Tax-Exempt Income for Pennsylvania Residents
The Franklin PA Tax-Free Income-A1 (FRPAX) is specifically designed to provide investors with a high level of income that is exempt from both federal and Pennsylvania state personal income taxes. This makes it an attractive option for residents of Pennsylvania who are looking to maximize their after-tax income. The fund achieves this by investing at least 80% of its total assets in securities that pay interest free from personal income taxes. This focus on tax efficiency is a key feature that sets FRPAX apart from other municipal bond funds, making it particularly appealing to tax-sensitive investors.
At A Glance
Executive Summary
FRPAX offers tax-free income for PA residents with a 3.16% yield and a competitive 0.69% expense ratio, focusing on municipal bonds.
Tax-exempt income for PA residents Competitive yield of 3.16% Strong correlation with benchmark
Limited to Pennsylvania municipal bonds Higher beta of 1.19 Negative three-year return
Performance Amidst Market Fluctuations
FRPAX has demonstrated resilience in its performance, particularly over the past year, with a notable 9.27% return. This is significantly higher than its benchmark, the BBG Muni USD Index, which posted a 7.51% return over the same period. However, the fund’s three-year annualized return is -1.13%, indicating some volatility in its performance. Despite this, the fund’s long-term performance since inception remains strong at 4.71%. Investors should consider the fund’s ability to outperform its benchmark in the short term while being mindful of its historical volatility.
Portfolio Composition and Top Holdings
The fund’s portfolio is heavily weighted towards municipal bonds, with 99.69% of its assets allocated to this sector. This concentration reflects its objective of providing tax-free income. The top holdings include bonds from reputable issuers such as LEHIGH CNTY PA GEN PURP AUTH CHARTER SCH REV and GEISINGER AUTH PA HEALTH SYS REV, each making up 2% of the portfolio. This strategic allocation to high-quality municipal bonds helps ensure the fund’s income-generating potential while maintaining a focus on credit quality and risk management.
Risk Metrics and Volatility
FRPAX exhibits a beta of 1.19, indicating a higher sensitivity to market movements compared to its benchmark. The fund’s alpha of 1.76% suggests it has been able to generate returns above the expected level given its risk profile. The Sharpe ratio of 0.45 and Treynor ratio of 1.47 further highlight the fund’s risk-adjusted performance. Despite a max drawdown of -2.7%, the fund’s downside risk is relatively contained with a downside risk (UI) of 0.92, suggesting a balanced approach to risk management.
Competitive Expense Ratio and Yield
With an expense ratio of 0.69%, FRPAX offers a competitive cost structure compared to similar funds in the municipal bond category. This is particularly advantageous for investors seeking to maximize their net returns. Additionally, the fund provides a yield of 3.16%, which is attractive for those looking for steady income. When compared to similar funds like TRPrice Tax-Free High Yield-Inv and Dupree NC Tax-Free Income, FRPAX’s yield is competitive, making it a viable option for income-focused investors.
Comparison with Similar Funds
When compared to similar funds such as TRPrice Tax-Free High Yield-Inv and JHancock High-Yield Municipal Bond-A, FRPAX holds its ground with a solid yield and competitive expense ratio. While some peers offer higher one-year returns, FRPAX’s focus on Pennsylvania municipal bonds provides a unique tax advantage for state residents. This specialization may limit its appeal to a broader audience but offers significant benefits to its target demographic. Investors should weigh these factors when considering FRPAX against its peers.
Investor Suitability and Considerations
FRPAX is particularly suitable for Pennsylvania residents seeking tax-exempt income. Its focus on municipal bonds provides a stable income stream, making it ideal for conservative investors who prioritize tax efficiency. However, potential investors should be aware of the fund’s higher beta and recent negative three-year return, which may not align with all risk appetites. The fund’s strong correlation with its benchmark and competitive yield make it a compelling choice for those looking to enhance their tax-advantaged income portfolio.
Conclusion: A Strategic Choice for Tax-Sensitive Investors
In conclusion, Franklin PA Tax-Free Income-A1 (FRPAX) stands out as a strategic choice for Pennsylvania residents seeking tax-exempt income. Its focus on high-quality municipal bonds, competitive yield, and cost-effective management make it an attractive option for tax-sensitive investors. While the fund’s higher beta and recent performance volatility may pose concerns, its long-term track record and tax advantages offer compelling reasons for inclusion in a diversified income portfolio. Investors should consider their tax situation and risk tolerance when evaluating FRPAX as part of their investment strategy.
Similar Securities
PTEPX: Putnam PA Tax-Exempt Income-A | Tax-Free Income for PA Residents
PTEPX offers tax-free income with a 2.97% yield and a focus on PA municipal bonds, ideal for risk-averse investors seeking tax efficiency.
PRXCX: TRPrice CA Tax-Free Bond-Inv | Tax-Free Income from California Bonds
PRXCX offers tax-free income with a 3.22% yield and a focus on California municipal bonds, featuring a competitive 0.57% expense ratio.
PRVAX: TRPrice VA Tax-Free Bond-Inv | Tax-Free Income from Virginia Bonds
PRVAX offers tax-free income with a 3.15% yield, focusing on Virginia municipal bonds. It stands out with a 0.55% expense ratio and strong risk metrics.
BIDIX: iShares Municipal Bond IxFd-Inst | Tax-Exempt Income Investment
BIDIX offers a 2.96% yield with a low 0.25% expense ratio, focusing on U.S. municipal bonds for tax-exempt income.
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/FRPAX/”>Yahoo: Franklin PA Tax-Free Income-A1
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