SORLX
Western Asset OR Municipals-C
Tax-Exempt Income for Oregon Investors
Western Asset OR Municipals-C (SORLX) is designed to provide Oregon investors with a high level of dividend income that is exempt from both regular federal income tax and Oregon state personal income tax. This fund is particularly appealing to investors residing in Oregon who are seeking to maximize their after-tax income. By investing at least 80% of its assets in Oregon municipal securities, SORLX offers a targeted approach to tax efficiency. The fund’s focus on municipal bonds with maturities ranging from three to over 20 years allows it to cater to investors looking for both income and capital preservation. This makes SORLX a strategic choice for those prioritizing tax-exempt income in their investment portfolios.
At A Glance
Executive Summary
SORLX offers Oregon tax-exempt income with a focus on municipal bonds, but has a higher expense ratio compared to peers.
Tax-exempt income for Oregon residents Focus on municipal bonds for stability Managed by Franklin Templeton Investments
Higher expense ratio than peers Negative alpha and Sharpe ratio Limited upside potential
Performance Analysis: A Mixed Bag
The performance of SORLX over various time frames presents a mixed picture. Over the past year, the fund has delivered a return of 6.20%, which is commendable given the challenging market conditions. However, its longer-term performance has been less impressive, with a five-year annualized return of just 0.15% and a ten-year return of 1.19%. These figures suggest that while the fund has potential for short-term gains, its long-term performance may not meet the expectations of investors seeking substantial growth. The fund’s inception return of 2.70% indicates moderate success over its lifetime, but investors should weigh these returns against the fund’s expense ratio and risk metrics before making a decision.
Expense Ratio: A Consideration for Cost-Conscious Investors
One of the key considerations for potential investors in SORLX is its expense ratio of 1.3%. This is relatively high compared to similar funds in the municipal bond category, which could impact the net returns for investors. For those who are cost-conscious, this expense ratio may be a deterrent, especially when compared to peers like Invesco Rochester NY Municipals-A (RMUNX) and American Funds Tax-Exempt Fund of CA-C (TECCX), which offer lower expense ratios. Investors should consider whether the tax benefits and income potential of SORLX justify the higher costs associated with managing the fund.
Risk Metrics: Understanding the Volatility
SORLX exhibits a range of risk metrics that investors should carefully consider. The fund’s beta of 0.97 indicates that it has a volatility level similar to the market, while its alpha of -1.32% suggests that it has underperformed its benchmark, the BBG Muni USD Idx (BBM-U). The Sharpe ratio of -0.42 further highlights the fund’s struggle to deliver risk-adjusted returns. Additionally, the fund’s standard deviation of 0.92% and downside risk of 0.77% suggest moderate volatility. These metrics indicate that while SORLX may offer tax benefits, it also carries certain risks that investors need to be aware of, particularly in terms of its ability to generate returns relative to its risk.
Portfolio Composition: A Focus on Oregon Municipal Bonds
The portfolio of SORLX is heavily concentrated in Oregon municipal bonds, with 99.91% of its assets allocated to this sector. This focus on municipal securities is designed to provide tax-exempt income to Oregon residents. The top holdings include significant allocations to bonds such as the University of Oregon General Revenue and Metro Oregon Dedicated Tax Revenue, each offering a 5% yield. This concentration in local municipal bonds not only supports the fund’s tax-exempt income objective but also aligns with its strategy of capital preservation. However, this narrow focus may limit diversification, which is an important consideration for investors seeking a balanced portfolio.
Comparative Analysis: How SORLX Stacks Up Against Peers
When compared to similar funds, SORLX presents both strengths and weaknesses. While it offers a unique focus on Oregon municipal bonds, its expense ratio is higher than many of its peers, such as Franklin CT Tax-Free Income-C (FCTIX) and American Funds Tax-Exempt Bond-C (TEBCX). In terms of performance, SORLX’s one-year return of 6.20% is competitive, but it falls short when compared to the 11.35% return of Invesco Rochester NY Municipals-A (RMUNX). Additionally, the fund’s yield of 1.85% is lower than some of its peers, which may be a consideration for income-focused investors. This comparative analysis suggests that while SORLX has its merits, investors should carefully evaluate its performance and costs relative to other options in the market.
Investor Suitability: Who Should Consider SORLX?
SORLX is particularly suitable for Oregon residents who are looking to maximize their tax-exempt income. The fund’s focus on municipal bonds makes it an attractive option for investors seeking stability and capital preservation. However, given its higher expense ratio and mixed performance metrics, it may not be the best choice for those seeking high growth or low-cost investment options. Investors who prioritize tax efficiency and are comfortable with the fund’s risk profile may find SORLX to be a valuable addition to their portfolios. It is also suitable for those who have a long-term investment horizon and are looking to benefit from the tax advantages associated with municipal bonds.
Conclusion: Balancing Tax Benefits with Performance
In conclusion, Western Asset OR Municipals-C (SORLX) offers a compelling option for Oregon investors seeking tax-exempt income through municipal bonds. While the fund provides significant tax benefits, its higher expense ratio and mixed performance metrics may be a concern for some investors. The fund’s focus on Oregon municipal securities aligns well with its objective of providing tax-efficient income, but it also limits diversification. Investors should weigh the tax advantages against the fund’s costs and performance when considering SORLX for their portfolios. Ultimately, this fund is best suited for tax-sensitive investors who prioritize income stability and are willing to accept the associated risks.
Similar Securities
FTGAX: Franklin GA Tax-Free Income-A1 | Tax-Exempt Income for Georgia Residents
FTGAX offers tax-free income for Georgia residents with a competitive 2.86% yield and a focus on municipal bonds.
FKTIX: Franklin Federal Tax-Free Income-A1 | Tax-Free Municipal Bond Investment
FKTIX offers a 3.60% tax-free yield with a low expense ratio of 0.64%, focusing on municipal bonds for capital preservation.
PRINX: TRPrice Summit Municipal Income-Inv | Tax-Exempt Income Fund
PRINX offers a 3.23% yield with a low 0.5% expense ratio, focusing on investment-grade municipal bonds for tax-exempt income.
FCAMX: Franklin CA High-Yield Municipal-A1 | Tax-Exempt Income for California Investors
FCAMX offers a 4.06% yield with tax-exempt income, outperforming its benchmark with a 1-year return of 11.50%.
FRORX: Franklin OR Tax-Free Income-A1 | Tax-Exempt Income for Oregon Residents
FRORX offers tax-exempt income for Oregon residents with a 3.17% yield and a competitive 0.67% expense ratio, focusing on municipal bonds.
Futher Reading
https://finance.yahoo.com/quote/SORLX/”>Yahoo: Western Asset OR Municipals-C
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