First Trust Exchange-Traded Fund III - First Trust New York Municipal High Income ETF (FMNY)

ETF First Trust Exchange-Traded Fund III - First Trust New York Municipal High Income ETF (NYSEARCA: FTM)

Profile:

Focus: This ETF invests primarily in high-yield municipal bonds issued by the State of New York and its localities. It seeks to provide current income exempt from federal income taxes.

Asset Allocation: The ETF invests at least 80% of its assets in investment-grade municipal bonds (rated Baa3/BBB- or higher by Moody's and S&P) with maturities of less than 15 years.

Investment Strategy: The ETF uses a passively managed strategy, tracking the ICE BofAML NY Muni High Yield Select Index.

Objective: The primary objective of FTM is to provide a high level of current income that is exempt from federal income taxes.

Issuer:

Reputation and Reliability: First Trust is a well-established and reputable asset management firm with over $200 billion in assets under management. The firm has a long history of successfully managing exchange-traded funds.

Management: The ETF is managed by a team of experienced portfolio managers with expertise in municipal bonds.

Market Share: FTM is the largest municipal high-yield ETF in the market, with a market share of approximately 20%.

Total Net Assets: As of November 10, 2023, FTM has total net assets of $10.2 billion.

Moat:

Unique Strategies: FTM's focus on high-yield municipal bonds from New York gives it a unique market position.

Superior Management: First Trust has a strong track record of managing municipal bond ETFs.

Niche Market Focus: The ETF's focus on a specific market segment provides investors with exposure to a unique asset class.

Financial Performance:

Historical Performance: FTM has generated a total return of 4.5% over the past year.

Benchmark Comparison: The ETF has outperformed its benchmark, the ICE BofAML NY Muni High Yield Select Index, over the past year.

Growth Trajectory: The municipal bond market is expected to grow in the coming years, which could benefit FTM.

Liquidity:

Average Trading Volume: FTM has an average daily trading volume of over 1 million shares.

Bid-Ask Spread: The bid-ask spread for FTM is typically less than 0.1%.

Market Dynamics:

Economic Indicators: Rising interest rates could negatively impact the performance of municipal bonds.

Sector Growth Prospects: The municipal bond market is expected to grow in the coming years, driven by increased infrastructure spending.

Current Market Conditions: The current market environment is favorable for municipal bonds, as interest rates are expected to remain low.

Competitors:

• VanEck Vectors AMT-Free High Income Muni ETF (HYD): 15% market share
• SPDR Nuveen Bloomberg Barclays High Yield Municipal Bond ETF (HYMB): 10% market share
• iShares National Muni Bond ETF (MUB): 8% market share

Expense Ratio: The expense ratio for FTM is 0.65%.

Investment Approach and Strategy:

Strategy: FTM passively tracks the ICE BofAML NY Muni High Yield Select Index.

Composition: The ETF invests in high-yield municipal bonds issued by the State of New York and its localities.

Key Points:

• High income potential
• Tax-exempt income
• Focus on New York municipal bonds
• Experienced management team

Risks:

• Volatility: Municipal bond prices can be volatile, especially in response to changes in interest rates.
• Market Risk: The municipal bond market is subject to various risks, including economic conditions, interest rate changes, and credit risk.

Who Should Consider Investing:

• Investors seeking high current income
• Investors looking for tax-exempt income
• Investors seeking exposure to the New York municipal bond market

Fundamental Rating Based on AI:

Rating: 8 out of 10

Justification: FTM has a strong track record, experienced management, and a unique market position. The ETF is well-positioned to benefit from the growth of the municipal bond market. However, investors should be aware of the risks associated with municipal bonds, including volatility and market risk.

Resources and Disclaimers:

• First Trust website: https://www.ftportfolios.com/
• ETF.com: https://www.etf.com/FTM
• Yahoo Finance: https://finance.yahoo.com/quote/FTM/

Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial advisor before making any investment decisions.