AITFX
Invesco Limited-Term Municipal Income-A2
Tax-Exempt Income with Capital Preservation
The Invesco Limited-Term Municipal Income-A2 (AITFX) fund is designed to provide investors with a high level of tax-exempt income while ensuring the preservation of capital. This fund primarily invests in high-quality, intermediate-term municipal securities with maturities of 10 years or less. As a Muni Short Term fund, AITFX is particularly appealing to investors seeking a stable income stream without the burden of federal taxes. The fund’s strategy focuses on maintaining a balance between income generation and risk management, making it a suitable choice for conservative investors who prioritize capital preservation.
At A Glance
Executive Summary
AITFX offers tax-exempt income with a 3.62% yield and low 0.34% expense ratio, focusing on high-quality municipal bonds for capital preservation.
Tax-exempt income with 3.62% yield Low expense ratio of 0.34% Focus on high-quality municipal bonds
Negative alpha and Sharpe ratio Limited upside potential Higher drawdown compared to peers
Performance Analysis: A Mixed Bag
AITFX has shown a mixed performance over various time frames. The fund’s one-year return stands at 5.40%, which is commendable given the current market conditions. However, its five-year and ten-year annualized returns are relatively modest at 1.72% and 1.79%, respectively. The inception return of 4.31% indicates a stable long-term performance. Despite these figures, the fund’s alpha is negative at -2.12%, suggesting that it has underperformed its benchmark, the BBG Muni USD Index, which had a one-year return of 7.51%. This underperformance is a critical consideration for potential investors.
Risk Metrics: Stability with Some Concerns
The risk metrics for AITFX reveal a stable yet cautious profile. With a beta of 0.60, the fund exhibits lower volatility compared to the market, aligning with its objective of capital preservation. The high correlation of 96.94% with its benchmark indicates that the fund’s performance closely follows the municipal bond market trends. However, the negative Sharpe ratio of -1.06 and Treynor ratio of -3.53 highlight concerns about the fund’s risk-adjusted returns. Additionally, the fund’s downside risk is relatively low at 0.41, but the upside potential is negative, which may deter growth-focused investors.
Portfolio Composition: A Focus on Municipal Bonds
AITFX’s portfolio is heavily weighted towards municipal bonds, with 98.24% 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 municipal securities such as the Washington State Health Care Facilities Authority Revenue and Texas State bonds, each contributing a small percentage to the overall portfolio. The fund also maintains a small cash position of 1.76% to manage liquidity. This composition underscores the fund’s commitment to high-quality municipal investments, offering a diversified approach within the municipal bond sector.
Competitive Expense Ratio and Yield
One of the standout features of AITFX is its competitive expense ratio of 0.34%, which is relatively low compared to similar funds in the category. This low expense ratio enhances the fund’s net returns, making it an attractive option for cost-conscious investors. Additionally, the fund offers a yield of 3.62%, providing a steady income stream that is exempt from federal taxes. This yield is higher than some of its peers, such as the Fidelity CA Ltd Trm Tax-Free Bond (FCSTX), which offers a yield of 1.94%. These factors make AITFX a compelling choice for investors seeking tax-efficient income.
Drawdown and Recovery: Managing Market Volatility
AITFX experienced a maximum drawdown of -1.2%, with the drawdown period lasting only one month. This relatively short drawdown length indicates the fund’s resilience in managing market volatility. However, the lack of a defined recovery length suggests that the fund may take longer to bounce back from market downturns compared to its peers. The peak and valley dates, from October 1, 2024, to November 6, 2024, highlight a period of market stress that the fund navigated with minimal impact. This ability to manage drawdowns effectively is crucial for investors focused on capital preservation.
Comparative Analysis: Standing Among Peers
When compared to similar funds, AITFX holds its ground with a competitive yield and expense ratio. For instance, the Johnson Municipal Income (JMUNX) fund offers a slightly higher one-year return of 7.72% but at a similar expense ratio. Meanwhile, the Capital Group CA Short-Term Municipal (CCSTX) and Fidelity CA Ltd Trm Tax-Free Bond (FCSTX) funds have lower yields and returns. AITFX’s focus on high-quality municipal bonds and its tax-exempt income make it a strong contender in the Muni Short Term category, despite its underperformance in terms of alpha and Sharpe ratio.
Conclusion: A Suitable Choice for Conservative Investors
In conclusion, the Invesco Limited-Term Municipal Income-A2 (AITFX) fund stands out for its focus on providing tax-exempt income with a strong emphasis on capital preservation. Its low expense ratio and competitive yield make it an attractive option for conservative investors seeking stable, tax-efficient returns. However, potential investors should be aware of the fund’s negative alpha and Sharpe ratio, which indicate some performance challenges. Overall, AITFX is well-suited for those prioritizing income stability and tax efficiency over aggressive growth.
Similar Securities
FFTFX: Franklin Federal Limited-Trm T/F Inc-A1 | Tax-Exempt Income Strategy
FFTFX offers tax-exempt income with a 2.66% yield and low volatility, ideal for conservative investors seeking short-term muni exposure.
PRFSX: TRPrice Tax-Free Short/Intermediate-Inv | Tax-Exempt Income with Stability
PRFSX offers tax-exempt income with a focus on municipal bonds, maintaining investment-grade quality and low volatility, ideal for conservative investors.
PRMDX: TRPrice MD Short-Term Tax-Free Bond-Inv | Tax-Free Income for Maryland Investors
PRMDX offers tax-free income with a focus on Maryland bonds, low volatility, and a competitive expense ratio of 0.53%.
LTNYX: Invesco Rochester Ltd-Term NY Muni-A | Tax-Exempt Income for NY Residents
LTNYX offers tax-exempt income with a 3.23% yield, focusing on NY municipal bonds. Its 0.90% expense ratio is competitive in its category.
ORSTX: Invesco Short Term Municipal-A | Tax-Exempt Income Investment
ORSTX offers tax-exempt income with a 3.23% yield, focusing on short-term municipal bonds. Its 0.74% expense ratio is competitive in its category.
Futher Reading
https://www.morningstar.com/funds/xnas/AITFX/quote
https://finance.yahoo.com/quote/AITFX/”>Yahoo: Invesco Limited-Term Municipal Income-A2
https://ftcloud.fasttrack.net/web/chart/AITFX
https://www.wsj.com/market-data/quotes/mutualfund/AITFX
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