ITCAX
Western Asset Interm Maturity CA Muni-A
Tax-Exempt Income for California Investors
The Western Asset Interm Maturity CA Muni-A (ITCAX) is specifically designed to provide California investors with a high level of current income that is exempt from both federal and California state personal income taxes. This makes it an attractive option for residents of California who are looking to maximize their after-tax income. The fund’s focus on municipal bonds ensures that the income generated is largely tax-free, which can be particularly beneficial for investors in higher tax brackets. With a yield of 2.59%, ITCAX offers a competitive income stream while maintaining a strong emphasis on the preservation of principal, aligning with its objective to provide a stable investment option for risk-averse investors.
At A Glance
Executive Summary
ITCAX offers tax-exempt income for California investors with a focus on principal preservation, featuring a 2.59% yield and 0.75% expense ratio.
Tax-exempt income for California residents Focus on principal preservation Managed by Franklin Templeton Investments
Lower yield compared to peers Negative alpha and Sharpe ratio Limited upside potential
Performance Analysis and Benchmark Comparison
When evaluating the performance of ITCAX, it is essential to consider its returns relative to its benchmark, the BBG Muni USD Index (BBM-U). Over the past year, ITCAX has delivered a return of 6.31%, which is slightly below the benchmark’s 7.51% return. This underperformance can be attributed to the fund’s conservative investment strategy, which prioritizes principal preservation over aggressive growth. Despite this, the fund’s long-term performance remains solid, with an inception return of 3.46%. Investors should note that while ITCAX may not always outperform its benchmark, its focus on tax-exempt income and principal preservation makes it a reliable choice for those seeking stability in their investment portfolio.
Risk Metrics and Volatility
ITCAX exhibits a relatively low level of volatility, as evidenced by its standard deviation of 0.83%. This low volatility is indicative of the fund’s conservative investment approach, which is further supported by its beta of 0.85, suggesting that the fund is less sensitive to market fluctuations compared to the broader municipal bond market. However, the fund’s negative alpha of -1.20% and Sharpe ratio of -0.42 indicate that it has not been able to generate excess returns relative to its risk level. Additionally, the fund’s downside risk, measured by its downside risk (UI) of 0.66, suggests that it has a limited potential for significant losses, making it a suitable option for risk-averse investors.
Portfolio Composition and Top Holdings
The portfolio of ITCAX is heavily concentrated in municipal bonds, with 99.87% of its assets allocated to this sector. This focus on municipal bonds aligns with the fund’s objective of providing tax-exempt income. The top holdings in the fund include the California Infrastructure & Economic Development Bank Revenue bonds and the M-S-R Energy Authority California Gas Revenue bonds, which together account for over 10% of the fund’s total assets. These holdings reflect the fund’s strategy of investing in high-quality municipal bonds that offer stable income streams. The fund’s emphasis on California-based municipal bonds ensures that the income generated is exempt from state taxes, further enhancing its appeal to California residents.
Expense Ratio and Cost Efficiency
ITCAX has an expense ratio of 0.75%, which is relatively moderate for a municipal bond fund. While this expense ratio is higher than some of its peers, it is justified by the fund’s focus on providing tax-exempt income and principal preservation. Investors should consider the cost of the fund in relation to its potential tax savings, as the tax-exempt nature of the income can offset the higher expense ratio. Additionally, the fund is managed by Franklin Templeton Investments, a reputable investment management firm known for its expertise in fixed-income securities, which adds value to the fund’s management and oversight.
Comparative Analysis with Similar Funds
When comparing ITCAX to similar funds, such as Allspring High Yield Municipal Bond-A (WHYMX) and Lord Abbett High Income Municipal Bond-A (HYMAX), it is evident that ITCAX offers a lower yield of 2.59% compared to the higher yields of its peers, which range from 3.60% to 4.46%. This difference in yield can be attributed to ITCAX’s conservative investment strategy, which prioritizes principal preservation over high returns. While ITCAX may not offer the highest yield, its focus on tax-exempt income and stability makes it a suitable choice for investors who prioritize risk management over aggressive growth. Additionally, ITCAX’s expense ratio of 0.75% is higher than the expense ratios of its peers, which are around 0.81%, but this is offset by the fund’s tax advantages.
Investor Suitability and Target Audience
ITCAX is particularly well-suited for California residents who are in higher tax brackets and are seeking to maximize their after-tax income. The fund’s focus on tax-exempt income makes it an attractive option for investors who are looking to reduce their tax liability while maintaining a stable investment portfolio. Additionally, the fund’s conservative investment strategy and emphasis on principal preservation make it a suitable choice for risk-averse investors who prioritize stability over high returns. ITCAX is also a good fit for investors who are looking for a long-term investment option that provides a steady income stream without exposing them to significant market volatility.
Conclusion: A Reliable Choice for Tax-Exempt Income
In conclusion, the Western Asset Interm Maturity CA Muni-A (ITCAX) stands out as a reliable choice for California investors seeking tax-exempt income with a focus on principal preservation. While the fund may not offer the highest yield compared to its peers, its emphasis on stability and tax advantages makes it an attractive option for risk-averse investors. Managed by Franklin Templeton Investments, ITCAX benefits from the expertise of a reputable investment management firm, ensuring that the fund is well-positioned to meet the needs of its target audience. Overall, ITCAX is a suitable choice for investors who prioritize tax efficiency and stability in their investment portfolio.
Similar Securities
SMBMX: Invesco SMA Municipal Bond | Tax-Exempt Income Investment
SMBMX offers a 4.17% yield with zero expense ratio, focusing on municipal bonds for tax-exempt income, outperforming its benchmark with an 8.07% 1-year return.
MANLX: BlackRock National Municipal-Inst | Tax-Exempt Income Investment
MANLX offers tax-exempt income with a 3.42% yield and a focus on medium to lower grade municipal bonds, ideal for tax-sensitive investors.
FRNJX: Franklin NJ Tax-Free Income-A1 | Tax-Exempt Municipal Bond Fund
FRNJX offers NJ tax-exempt income with a 3.09% yield and 0.68% expense ratio, ideal for state residents seeking municipal bond exposure.
ACTHX: Invesco High-Yield Municipal-A | Tax-Exempt Income with High Yield
ACTHX offers a 5.14% yield with a focus on medium and lower-grade municipal securities, providing tax-exempt income for high-risk investors.
MACMX: BlackRock CA Municipal Opportunity-Inst | Tax-Exempt Income from CA Bonds
MACMX offers tax-exempt income with a 3.29% yield and 0.54% expense ratio, focusing on California municipal bonds for tax-sensitive investors.
Futher Reading
https://www.morningstar.com/funds/xnas/ITCAX/quote
https://finance.yahoo.com/quote/ITCAX/”>Yahoo: Western Asset Interm Maturity CA Muni-A
https://ftcloud.fasttrack.net/web/chart/ITCAX
https://www.wsj.com/market-data/quotes/mutualfund/ITCAX
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