STXAX
Western Asset Municipal High Income-A
Introduction to Western Asset Municipal High Income-A
The Western Asset Municipal High Income-A (STXAX) is a mutual fund designed to provide investors with maximum current income that is exempt from federal income taxes. This fund primarily invests in intermediate- and long-term municipal bonds, with maturities ranging from 3 to 20 years at the time of purchase. As part of the Franklin Templeton Investments family, STXAX is categorized under Muni Junk Bonds, which typically offer higher yields in exchange for increased risk. With an expense ratio of 0.81%, this fund is tailored for investors seeking tax-exempt income while being willing to accept the volatility associated with high-yield municipal bonds.
At A Glance
Executive Summary
STXAX offers high-yield, tax-exempt income with a 3.84% yield and 0.81% expense ratio, ideal for risk-tolerant investors seeking municipal bond exposure.
High yield of 3.84% tax-exempt income Strong performance with 10.85% 1-year return Managed by Franklin Templeton Investments
Higher risk with a beta of 1.22 Expense ratio of 0.81% higher than some peers Limited sector diversification
Performance Highlights and Recent Trends
STXAX has demonstrated impressive performance over the past year, with a 1-year return of 10.85%, 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. The fund’s alpha of 3.33% indicates its ability to generate returns above the benchmark, while a Sharpe Ratio of 0.82 suggests a favorable risk-adjusted return. Investors should note the fund’s beta of 1.22, which implies higher volatility compared to the benchmark, reflecting the inherent risks of investing in high-yield municipal bonds.
Portfolio Composition and Top Holdings
The portfolio of STXAX is heavily concentrated in municipal bonds, with a bond sector allocation of 99.96% in munis. This focus on municipal bonds is designed to maximize tax-exempt income for investors. The fund’s top holdings include M-S-R Energy Authority California Gas Revenue bonds at 5.34%, New York Transportation Development Corporation Special Facility Revenue bonds at 3.04%, and Houston Texas Airport System Revenue bonds at 2.28%. These holdings reflect the fund’s strategy of investing in revenue-generating municipal projects, which can offer higher yields. The fund’s allocation strategy is aimed at capturing the benefits of municipal bonds while managing the risks associated with high-yield investments.
Risk Metrics and Volatility Analysis
Investors considering STXAX should be aware of its risk profile, which is characterized by a beta of 1.22, indicating higher volatility compared to its benchmark. The fund’s standard deviation of 1.17% and a max drawdown of -2.7% highlight the potential for fluctuations in value. However, the fund’s Treynor Ratio of 2.72 and an upside potential of 4.07 suggest that it has been able to manage risk effectively while providing opportunities for growth. The correlation with the benchmark is high at 97.27%, indicating that the fund’s performance is closely tied to the broader municipal bond market. Investors should weigh these risk factors against the potential for higher returns when considering this fund.
Comparative Analysis with Similar Funds
When compared to similar funds, STXAX holds its ground with a competitive yield of 3.84% and a 1-year return of 10.85%. For instance, Allspring High Yield Municipal Bond-A (WHYMX) offers a higher yield of 4.46% but also comes with a slightly higher beta of 0.23, indicating more volatility. Lord Abbett High Income Municipal Bond-A (HYMAX) and City National Rochdale Muni High Inc-Ser (CNRMX) also present higher yields and returns, but STXAX’s performance remains robust given its strategic focus and management by Franklin Templeton Investments. The expense ratio of 0.81% is slightly higher than some peers, but the fund’s strong performance may justify this cost for investors seeking tax-exempt income.
Tax-Exempt Income and Yield Considerations
One of the primary attractions of STXAX is its ability to provide tax-exempt income, making it an appealing choice for investors in higher tax brackets. The fund’s yield of 3.84% is competitive within the muni junk bond category, offering a substantial income stream that is exempt from federal taxes. This feature is particularly beneficial for investors looking to maximize after-tax returns. The fund’s focus on high-yield municipal bonds allows it to offer higher yields compared to traditional municipal bond funds, albeit with increased risk. Investors should consider their tax situation and risk tolerance when evaluating the potential benefits of this fund.
Suitability for Risk-Tolerant Investors
STXAX is best suited for investors who are comfortable with the risks associated with high-yield municipal bonds and are seeking tax-exempt income. The fund’s higher beta and volatility metrics suggest that it may not be ideal for conservative investors or those with a low risk tolerance. However, for those willing to accept the potential for price fluctuations, STXAX offers an attractive yield and the opportunity for capital appreciation. The fund’s strategic focus on revenue-generating municipal projects provides a unique investment opportunity for those looking to diversify their fixed-income portfolio with tax-advantaged securities.
Conclusion: Why STXAX Stands Out
In conclusion, the Western Asset Municipal High Income-A (STXAX) stands out for its ability to deliver high-yield, tax-exempt income through a carefully curated portfolio of municipal bonds. Managed by Franklin Templeton Investments, the fund offers a compelling option for risk-tolerant investors seeking to enhance their income while benefiting from tax advantages. Despite its higher expense ratio, the fund’s strong performance and strategic focus on high-yield municipal bonds make it a noteworthy choice for those looking to diversify their investment portfolio. Investors should consider their individual risk tolerance and tax situation when deciding if STXAX aligns with their financial goals.
Similar Securities
PRIHX: TRPrice Intermed Tax-Free High Yield-Inv | Tax-Exempt Income
PRIHX offers a 3.48% yield with a focus on noninvestment-grade municipal bonds, providing tax-exempt income with a competitive expense ratio of 0.46%.
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.
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.
STXAX: Western Asset Municipal High Income-A | Tax-Exempt High-Yield Muni Bonds
STXAX offers high-yield, tax-exempt income with a 3.84% yield and 0.81% expense ratio, ideal for risk-tolerant investors 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.
Futher Reading
https://www.morningstar.com/funds/xnas/STXAX/quote
https://finance.yahoo.com/quote/STXAX/”>Yahoo: Western Asset Municipal High Income-A
https://ftcloud.fasttrack.net/web/chart/STXAX
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