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

First Trust New York Municipal High Income ETF (FTHI)

Profile:

FTHI is an actively managed exchange-traded fund (ETF) that primarily invests in long-term municipal bonds exempt from federal income taxes. It targets high income generation and focuses on bonds issued by the State of New York and its municipalities. The ETF employs a bottom-up approach, emphasizing credit analysis and security selection to maximize income potential.

Objective:

The primary investment goal of FTHI is to provide current income exempt from federal income tax, while also seeking to preserve capital.

Issuer:

First Trust Advisors L.P. is the issuer of FTHI.

Reputation and Reliability:

First Trust Advisors L.P. is a reputable asset management firm with over 20 years of experience and over $229 billion in assets under management. The firm has a strong track record in managing fixed income ETFs and is known for its active management approach.

Management:

The ETF is managed by a team of experienced portfolio managers with expertise in municipal bond analysis and selection. The team utilizes a rigorous research process to identify attractive investment opportunities.

Market Share:

FTHI captures approximately 0.2% of the municipal high-yield bond ETF market share.

Total Net Assets:

As of November 10, 2023, FTHI has approximately $477 million in total net assets.

Moat:

FTHI's competitive advantage lies in its active management approach and experienced portfolio management team. The team's deep understanding of the municipal bond market and focus on credit analysis enable them to uncover attractive investment opportunities, potentially leading to higher income generation compared to passively managed municipal bond ETFs.

Financial Performance:

Since its inception in 2014, FTHI has delivered an annualized return of 4.14%. The ETF outperformed the S&P Municipal High Yield Bond Index during this period, demonstrating the effectiveness of its active management approach.

Benchmark Comparison:

Over the past three years, FTHI has outperformed the S&P Municipal High Yield Bond Index by an average of 0.5% annually. This outperformance highlights the ETF's ability to generate higher returns while maintaining a comparable risk profile.

Growth Trajectory:

The municipal bond market is expected to experience moderate growth in the coming years, driven by factors such as infrastructure spending and low-interest rates. FTHI is well-positioned to capitalize on this growth with its focus on high-income generation and active management approach.

Liquidity:

FTHI has an average trading volume of approximately 30,000 shares per day, indicating moderate liquidity. The ETF's bid-ask spread is relatively tight, suggesting low trading costs.

Market Dynamics:

Factors affecting the ETF's market environment include changes in interest rates, economic conditions, and credit quality of municipal issuers.

Competitors:

Key competitors in the municipal high-yield bond ETF space include:

• iShares National Muni Bond ETF (MUB) - 12.2% market share
• SPDR Nuveen Bloomberg Barclays High Yield Municipal Bond ETF (HYMB) - 11.8% market share
• VanEck Merk High Income Municipal Bond ETF (HYD) - 5.5% market share

Expense Ratio:

The expense ratio of FTHI is 0.65%.

Investment Approach and Strategy:

FTHI employs an active management approach, focusing on selecting individual municipal bonds with the potential for high income generation. The ETF's portfolio primarily consists of long-term bonds issued by the State of New York and its municipalities.

Key Points:

• Potentially higher income generation compared to passively managed municipal bond ETFs.
• Focus on New York municipal bonds provides exposure to a specific geographic market.
• Actively managed with a team of experienced portfolio managers.

Risks:

• Interest rate risk: Rising interest rates could lead to a decline in the value of the ETF's holdings.
• Credit risk: The ETF's holdings are subject to the credit risk of the underlying issuers.
• Liquidity risk: Although the ETF has moderate liquidity, there is a risk that it may become difficult to buy or sell shares during periods of market volatility.

Who Should Consider Investing:

Investors seeking high income from federal tax-exempt municipal bonds and comfortable with the risks associated with high-yield bonds may consider FTHI.

Fundamental Rating Based on AI:

Based on an AI-based analysis of factors such as financial health, market position, and future prospects, FTHI receives a rating of 7.5 out of 10. The strong track record of the issuer, experienced management team, and the ETF's potential for outperformance contribute to the positive rating. However, the relatively high expense ratio and the risks associated with high-yield bonds justify the rating below 8.

Resources:

• First Trust Advisors L.P.: https://www.ftportfolios.com/
• ETF Database: https://etfdb.com/etf/FTHI/
• Morningstar: https://www.morningstar.com/etfs/arcx/fthi/quote

Disclaimer:

The information provided in this overview is for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.

Note: Please note that market data and statistics provided are as of November 10, 2023, and may change over time.