ACTHX
Invesco High-Yield Municipal-A
Introduction to Invesco High-Yield Municipal-A
The Invesco High-Yield Municipal-A (ACTHX) fund is designed to provide investors with a high level of interest income that is exempt from federal income tax. This fund primarily invests in a portfolio of medium and lower-grade municipal securities, making it an attractive option for those seeking tax-exempt income. Managed by Invesco, a well-known name in the investment world, ACTHX is categorized under Muni Junk Bonds, which typically offer higher yields in exchange for increased risk. With a yield of 5.14%, this fund is particularly appealing to investors with a higher risk tolerance who are looking to maximize their tax-exempt income.
At A Glance
Executive Summary
ACTHX offers a 5.14% yield with a focus on medium and lower-grade municipal securities, providing tax-exempt income for high-risk investors.
High yield of 5.14% tax-exempt income Strong performance with 13.63% 1-year return Diversified municipal bond portfolio
High expense ratio of 1.54% Exposure to medium and lower-grade securities Potential for higher volatility
Performance Highlights: A Strong Year for ACTHX
ACTHX has demonstrated impressive performance over the past year, with a 1-year return of 13.63%, 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 focus on medium and lower-grade municipal securities, which have benefited from favorable market conditions. The fund’s alpha of 6.11% indicates that it has generated returns above what would be expected based on its beta of 1.54, suggesting effective management and investment strategy. Investors looking for high returns in the municipal bond space may find ACTHX’s recent performance particularly compelling.
Portfolio Composition: Focus on Municipal Securities
The portfolio of ACTHX is heavily weighted towards municipal securities, with 97.47% of its assets allocated to this sector. This focus aligns with the fund’s objective of providing tax-exempt income. The top holdings include various tobacco settlement revenue bonds, which are known for their higher yields. The fund also maintains a small cash position of 2.50% to manage liquidity. This concentrated exposure to municipal bonds, particularly those of medium and lower-grade, allows the fund to offer a higher yield, but also introduces a higher level of credit risk. Investors should be aware of this risk when considering ACTHX for their portfolio.
Risk and Volatility: Understanding the Trade-offs
Investing in ACTHX involves understanding the trade-offs between risk and reward. The fund’s beta of 1.54 suggests that it is more volatile than the market, which is typical for high-yield municipal bond funds. However, the fund’s Sharpe ratio of 1.19 indicates that it has been able to achieve a favorable risk-adjusted return. The maximum drawdown of -3.2% highlights the potential for loss, but the fund’s ability to recover quickly is a positive sign. Investors should consider their risk tolerance and investment horizon when evaluating ACTHX, as the fund’s focus on medium and lower-grade securities can lead to periods of increased volatility.
Comparative Analysis: How ACTHX Stacks Up Against Peers
When compared to similar funds, ACTHX stands out for its high yield and strong recent performance. For instance, while the Nuveen CA High-Yield Municipal Bond-A (NCHAX) offers a higher 1-year return of 15.00%, ACTHX’s yield of 5.14% is more attractive than many of its peers, such as the Invesco Rochester AMT-Free NY Muni-A (OPNYX) with a yield of 4.10%. However, ACTHX’s expense ratio of 1.54% is higher than those of its peers, which could impact net returns over time. Investors should weigh the benefits of ACTHX’s high yield and strong performance against its higher expense ratio when making investment decisions.
Expense Considerations: Balancing Costs and Returns
The expense ratio of ACTHX is 1.54%, which is relatively high compared to other funds in the municipal bond category. This higher cost can eat into the fund’s returns, especially over the long term. However, the fund’s strong performance and high yield may justify the expense for some investors. It’s important for potential investors to consider whether the fund’s returns and tax-exempt income potential outweigh the impact of its expense ratio. For those who prioritize high yield and are willing to accept higher costs, ACTHX may still be a suitable choice.
Investor Suitability: Who Should Consider ACTHX?
ACTHX is best suited for investors who are seeking high levels of tax-exempt income and are comfortable with the risks associated with medium and lower-grade municipal securities. The fund’s high yield of 5.14% and strong recent performance make it an attractive option for those with a higher risk tolerance. However, the fund’s higher expense ratio and potential for increased volatility mean that it may not be suitable for conservative investors or those with a low risk tolerance. Investors should carefully assess their financial goals and risk appetite before investing in ACTHX.
Conclusion: The Appeal of Invesco High-Yield Municipal-A
In conclusion, the Invesco High-Yield Municipal-A (ACTHX) fund offers a compelling option for investors seeking high levels of tax-exempt income. With a yield of 5.14% and a strong 1-year return of 13.63%, the fund has demonstrated its ability to deliver attractive returns. However, the fund’s focus on medium and lower-grade municipal securities and its higher expense ratio mean that it is best suited for investors with a higher risk tolerance. For those willing to accept the associated risks, ACTHX provides an opportunity to enhance their portfolio’s income potential while benefiting from tax-exempt interest.
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Futher Reading
https://finance.yahoo.com/quote/ACTHX/”>Yahoo: Invesco High-Yield Municipal-A
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