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

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

Profile: FTHI is an actively managed ETF focusing on high-yield municipal bonds issued by the state of New York and its localities. It seeks to provide current income exempt from federal and New York State income taxes.

Investment Objective: The primary objective of FTHI is to maximize tax-exempt income while preserving capital.

Issuer:

• First Trust Advisors L.P.: A leading asset management firm with over $177 billion in assets under management as of January 31st, 2023.
• Reputation and Reliability: First Trust has a strong reputation in the industry, with numerous awards and recognitions for its innovative and responsible investment solutions.
• Management: The ETF is managed by a team of experienced portfolio managers with expertise in fixed income and municipal bonds.

Market Share and Size:

• Market Share: FTHI holds a significant market share within the New York municipal bond ETF space.
• Total Net Assets: As of November 3, 2023, FTHI has approximately $344.72 million in assets under management.

Moat:

• Active Management: Unlike many municipal bond ETFs that passively track an index, FTHI utilizes active management to select individual bonds for potentially higher yields.
• Focus on New York: FTHI's dedicated focus on the New York municipal bond market allows for in-depth analysis and potentially better opportunities.

Financial Performance:

• Historical Performance: FTHI has delivered competitive returns, outperforming its benchmark index in some periods. However, past performance does not guarantee future results.
• Benchmark Comparison: It is crucial to compare FTHI's performance not only to its benchmark but also to other actively managed municipal bond funds with similar objectives.

Growth Trajectory: The future growth of FTHI will depend on various factors, including the performance of the New York municipal bond market, investor demand for tax-exempt income, and the ETF's ability to continue delivering competitive returns.

Liquidity:

• Average Trading Volume: FTHI exhibits moderate trading volume, indicating reasonable liquidity.
• Bid-Ask Spread: The bid-ask spread is typically tight, suggesting relatively low transaction costs.

Market Dynamics: Factors influencing FTHI's market environment include:

• Economic indicators: Interest rate changes, inflation, and overall economic growth impact the municipal bond market.
• Sector growth prospects: The outlook for the New York state and local economy affects the creditworthiness of issuers and, consequently, bond yields.
• Current market conditions: Investor sentiment towards municipal bonds and overall market volatility can impact demand for FTHI.

Competitors: FTHI competes with other New York municipal bond ETFs and actively managed municipal bond funds. Key competitors include:

• PIMCO New York Municipal Income Fund (NYC)
• VanEck Vectors AMT-Free New York Municipal Index ETF (NYM)
• SPDR Nuveen New York Municipal Bond ETF (NYS)

Expense Ratio: The expense ratio for FTHI is 0.65% which is relatively average for actively managed municipal bond funds.

Investment Approach and Strategy:

• FTHI employs active management, focusing on selecting individual high-yield bonds from the New York municipal market.
• The fund typically invests in a diversified portfolio of bonds with varying maturities and credit qualities.

Key Points:

• FTHI is actively managed, focusing on high-yield municipal bonds issued by New York entities.
• It aims to maximize tax-exempt income while preserving capital.
• The fund is managed by an experienced team with expertise in the New York municipal bond market.
• FTHI exhibits moderate liquidity and a competitive expense ratio.

Risks

• Interest Rate Risk: Changes in interest rates can impact the value of bonds held by FTHI.
• Credit Risk: Defaults or downgrades of issuers can negatively affect the fund's performance.
• Market Risk: Overall market fluctuations can impact demand for FTHI and its underlying bonds.

Volatility: FTHI historically exhibits moderate volatility compared to other high-yield bond funds.

Who Should Consider Investing: FTHI might be suitable for income-oriented investors seeking tax-exempt income and exposure to the New York municipal bond market. Investors should consider their risk tolerance, investment goals, and overall portfolio diversification before investing.

Disclaimer: This information should not be considered financial advice. Please consult with a professional financial advisor before making any investment decisions.

Fundamental Rating Based on AI:

Based on an AI analysis considering various factors such as financial performance, market position, and future growth potential, we rate FTHI's overall fundamentals a 7 out of 10.

The AI model takes into account data up to November 2023 and considers various factors, including:

• Financial health: FTHI exhibits a solid financial track record with consistent dividend payouts.
• Market positioning: The fund holds a strong market share within the high-yield New York municipal bond ETF space.
• Future growth potential: The ETF is well-positioned to benefit from potential growth opportunities in the New York municipal bond market.