VKLMX
Invesco Intermediate-Term Muni Income-A
Tax-Exempt Income with Capital Preservation
The Invesco Intermediate-Term Muni Income-A (VKLMX) is designed to provide investors with a high level of current income that is exempt from federal income tax, while also focusing on the preservation of capital. This fund primarily invests in a diversified portfolio of municipal securities that are rated investment grade. By maintaining a dollar-weighted average portfolio life of three to ten years, VKLMX aims to balance income generation with risk management, making it an attractive option for investors seeking tax-efficient income solutions.
At A Glance
Executive Summary
VKLMX offers tax-exempt income with a 3.45% yield and low volatility, ideal for conservative investors seeking capital preservation.
Tax-exempt income potential Low volatility with a beta of 0.82 Strong correlation with benchmark
Higher expense ratio at 0.85% Lower yield compared to peers Limited growth potential
Performance Amidst Market Fluctuations
VKLMX has demonstrated resilience in various market conditions, as evidenced by its recent performance metrics. Over the past year, the fund has achieved a return of 7.87%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51%. This performance is particularly notable given the fund’s focus on capital preservation and tax-exempt income. The fund’s alpha of 0.36% and beta of 0.82 indicate a strong ability to generate returns above the benchmark while maintaining lower volatility, which is crucial for risk-averse investors.
Portfolio Composition and Top Holdings
The fund’s portfolio is heavily weighted towards municipal bonds, with 99.66% of its assets allocated to this sector. This focus on municipal securities is consistent with the fund’s objective of providing tax-exempt income. The top holdings include bonds from the New York Transportation Development Corporation and the Puerto Rico Sales Tax Financing Corporation, among others. These holdings reflect a strategic selection of high-quality, investment-grade municipal bonds that support the fund’s income and capital preservation goals.
Risk Metrics and Volatility Management
VKLMX exhibits a low-risk profile, as indicated by its risk metrics. The fund’s standard deviation of 0.78% and a beta of 0.82 suggest lower volatility compared to the broader market. Additionally, the fund’s Sharpe ratio of 0.13 and Treynor ratio of 0.43 highlight its ability to deliver returns relative to its risk. The fund’s downside risk is minimized, with a maximum drawdown of only -1.6%, demonstrating effective risk management strategies that protect investor capital during market downturns.
Comparative Analysis with Similar Funds
When compared to similar funds, VKLMX offers a competitive yet distinct profile. While its yield of 3.45% is lower than peers like Allspring High Yield Municipal Bond-A (4.46%) and Lord Abbett High Income Municipal Bond-A (4.32%), VKLMX compensates with a focus on capital preservation and lower volatility. Its expense ratio of 0.85% is higher than some competitors, but the fund’s strong correlation with its benchmark and consistent performance may justify the cost for investors prioritizing stability and tax-exempt income.
Expense Ratio and Cost Considerations
The expense ratio of VKLMX stands at 0.85%, which is relatively higher compared to some of its peers. This cost factor is an important consideration for investors, as it can impact net returns over time. However, the fund’s ability to deliver consistent tax-exempt income and its focus on capital preservation may offset the higher expense ratio for investors who value these attributes. It’s crucial for potential investors to weigh the cost against the benefits of the fund’s strategic approach to municipal bond investing.
Investor Suitability and Strategic Fit
VKLMX is particularly well-suited for conservative investors seeking a stable source of tax-exempt income. Its focus on investment-grade municipal bonds and capital preservation makes it an ideal choice for those looking to minimize risk while maintaining steady income. The fund’s low volatility and strong correlation with its benchmark further enhance its appeal to risk-averse investors. Additionally, its strategic allocation and performance metrics make it a valuable component of a diversified portfolio focused on income generation and risk management.
Conclusion: A Reliable Choice for Tax-Exempt Income
In conclusion, the Invesco Intermediate-Term Muni Income-A (VKLMX) stands out as a reliable option for investors seeking tax-exempt income with a focus on capital preservation. Its strong performance, low volatility, and strategic portfolio composition make it an attractive choice for conservative investors. While the expense ratio is higher than some peers, the fund’s consistent returns and risk management capabilities provide a compelling case for inclusion in a diversified investment strategy. Investors prioritizing tax efficiency and stability will find VKLMX to be a suitable addition to their portfolios.
Similar Securities
PXMAX: Putnam MA Tax-Exempt Income-A | Tax-Free Income for MA Residents
PXMAX offers tax-free income with a 2.81% yield, focusing on Massachusetts municipal bonds, suitable for conservative investors.
PSMEX: Putnam Short-Term Municipal Income-A | Tax-Exempt Income & Capital Preservation
PSMEX offers tax-exempt income with a focus on capital preservation, featuring a 3.08% yield and low volatility, ideal for conservative investors.
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.
FCTIX: Franklin CT Tax-Free Income-C | Tax-Exempt Income for Connecticut Investors
FCTIX offers tax-free income for CT residents with a 2.24% yield and 1.3% expense ratio, focusing on municipal bonds.
IMNYX: Western Asset Interm Maturity NY Muni-A | Tax-Exempt Income for NY Investors
IMNYX offers NY tax-exempt income with a 2.55% yield and 0.77% expense ratio, ideal for tax-sensitive investors.
Futher Reading
https://www.morningstar.com/funds/xnas/VKLMX/quote
https://finance.yahoo.com/quote/VKLMX/”>Yahoo: Invesco Intermediate-Term Muni Income-A
https://ftcloud.fasttrack.net/web/chart/VKLMX
https://www.wsj.com/market-data/quotes/mutualfund/VKLMX
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