PXMNX
Putnam MN Tax-Exempt Income-A
Tax-Exempt Income Focus
The Putnam MN Tax-Exempt Income-A fund (PXMNX) is designed to provide investors with a high level of current income that is exempt from both federal and Minnesota state income taxes. This makes it particularly attractive for Minnesota residents seeking to maximize their after-tax income. The fund’s primary objective is to invest in municipal bonds, which are known for their tax advantages and relative safety compared to other fixed-income securities. By focusing on tax-exempt income, PXMNX offers a compelling option for investors looking to preserve capital while benefiting from tax savings.
At A Glance
Executive Summary
PXMNX offers tax-free income with a 2.73% yield, focusing on Minnesota municipal bonds. It has a competitive expense ratio of 0.88%.
Tax-exempt income for Minnesota residents Competitive yield of 2.73% Focus on capital preservation
Higher expense ratio compared to peers Limited geographic diversification Potentially lower returns in high-yield environments
Performance in Context
PXMNX has demonstrated a solid performance over the past year, with a 1-year return of 8.33%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This performance is notable given the fund’s focus on capital preservation and tax-exempt income. However, over longer periods, such as the three-year and five-year marks, the fund’s returns have been more modest, with a three-year return of -0.30% and a five-year return of 0.96%. This suggests that while the fund can perform well in certain market conditions, it may not be the best choice for investors seeking high long-term growth.
Risk and Volatility Metrics
PXMNX exhibits a relatively low level of volatility, with a standard deviation of 1.08%, which is typical for municipal bond funds. The fund’s beta of 1.15 indicates that it is slightly more volatile than the market, but its high correlation with the benchmark (99.24%) suggests that it closely follows the performance of the municipal bond market. The fund’s alpha of 0.81% reflects its ability to generate returns above the benchmark, while the Sharpe ratio of 0.22 indicates that the fund’s risk-adjusted returns are modest. These metrics suggest that PXMNX is suitable for risk-averse investors who prioritize stability and tax-exempt income over high returns.
Portfolio Composition and Holdings
The fund’s portfolio is heavily concentrated in Minnesota municipal bonds, with 99.29% of its assets allocated to this sector. This focus on local bonds provides tax advantages for Minnesota residents but also limits geographic diversification. The top holdings include bonds from the Minnesota State Higher Education Facilities Authority and the Minneapolis Health Care System, each contributing a small percentage to the overall portfolio. This concentration in local bonds can be beneficial for investors seeking tax-exempt income but may pose risks if the local economy faces challenges. The fund’s minimal allocation to cash (0.71%) suggests a strong commitment to maintaining a fully invested portfolio.
Comparative Analysis with Peers
When compared to similar funds, PXMNX offers a competitive yield of 2.73%, though its expense ratio of 0.88% is higher than some peers, such as the Sit Tax-Free Income fund (SNTIX) with an expense ratio of 0.94%. Other funds like the DWS Strategic High Yield Tax-Free-A (NOTAX) offer higher yields and returns, but with potentially higher risk profiles. PXMNX’s focus on Minnesota municipal bonds provides a unique advantage for local investors, but those seeking broader diversification or higher yields might consider alternatives like the Transamerica High-Yield Municipal-A (THAYX), which offers a higher yield of 4.05%.
Expense Ratio Considerations
The expense ratio of PXMNX stands at 0.88%, which is relatively competitive within the municipal bond fund category, though not the lowest. This fee structure reflects the fund’s active management strategy, which aims to optimize tax-exempt income while preserving capital. Investors should weigh this expense against the fund’s performance and tax benefits, particularly if they are Minnesota residents who can fully utilize the state tax exemption. While some similar funds offer lower expense ratios, PXMNX’s focus on local bonds and its tax advantages may justify the cost for certain investors.
Suitability for Investor Profiles
PXMNX is particularly well-suited for Minnesota residents who are in higher tax brackets and seek to maximize their after-tax income. The fund’s focus on tax-exempt income and capital preservation makes it an attractive option for conservative investors who prioritize stability over high returns. However, investors should be aware of the fund’s limited geographic diversification and consider whether the potential tax benefits outweigh the risks associated with a concentrated portfolio. For those who value tax savings and are comfortable with the fund’s risk profile, PXMNX offers a compelling investment opportunity.
Conclusion: A Strategic Choice for Tax-Conscious Investors
In conclusion, the Putnam MN Tax-Exempt Income-A fund (PXMNX) stands out as a strategic choice for investors seeking tax-exempt income, particularly those residing in Minnesota. Its focus on local municipal bonds provides significant tax advantages, making it an ideal option for tax-conscious investors. While the fund’s expense ratio is higher than some peers, its performance, particularly over the past year, demonstrates its ability to deliver competitive returns in favorable market conditions. Investors should consider their tax situation, risk tolerance, and investment goals when evaluating PXMNX as part of their portfolio strategy.
Similar Securities
AITFX: Invesco Limited-Term Municipal Income-A2 | Tax-Exempt Income & Capital Preservation
AITFX offers tax-exempt income with a 3.62% yield and low 0.34% expense ratio, focusing on high-quality municipal bonds for capital preservation.
ORSTX: Invesco Short Term Municipal-A | Tax-Exempt Income Investment
ORSTX offers tax-exempt income with a 3.23% yield, focusing on short-term municipal bonds. Its 0.74% expense ratio is competitive in its category.
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%.
MDXBX: TRPrice MD Tax-Free Bond-Inv | Tax-Free Income for Maryland Investors
MDXBX offers a 3.23% yield with a low 0.49% expense ratio, focusing on Maryland municipal bonds for tax-free income.
LTEBX: American Funds Limited Term TaxEx Bd-A | Tax-Exempt Income & Capital Preservation
LTEBX offers tax-exempt income with a focus on capital preservation, featuring a 0.6% expense ratio and 2.26% yield, ideal for conservative investors.
Futher Reading
https://finance.yahoo.com/quote/PXMNX/”>Yahoo: Putnam MN Tax-Exempt Income-A
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