First, we select the top trending category from more than 200 categories listed on MutualFunds.com based on the percentage increase in monthly viewership. Then, we choose the top three funds with the highest one-year trailing total returns from the top trending category. To ensure funds’ quality and staying power, we only look at those mutual funds with a minimum of $250 million in assets and a track record of at least three years. We also remove those mutual funds closed to new investors and not available for investment outside registered accounts such as retirement or 529.
In this edition, we take a closer look at trending New York Muni Bond Funds for investors.
Muni bonds tend to do well in high-tax states, like California and New York, where wealthy investors use them to increase their after-tax income (muni bond interest isn’t subject to federal or state income taxes).
In 2017, former President Trump’s tax overhaul capped state and local tax deductions at $10,000, leaving wealthy individuals fewer deductions to offset their tax liabilities. More recently, President Biden’s proposed tax hikes promise to increase taxes on the rich, although proposals to increase the cap of SALT deductions could ease some concerns.
Our breakdown of each fund includes vital aspects, such as one-year performance, performance from inception, fund expenses, investment strategy, and management team’s profile, to give you an overview of how these funds hold up against their peers.
Be sure to check out the New York Muni Bond Funds page to find out more about the other funds in this category as well.
The number one mutual fund on this week’s list is the Invesco Rochester New York Municipals Fund (RMUNX). It provided an exceptional trailing one-year total return of 7.35% with a 0.92% expense ratio and a 3.24% yield, making it the highest yielding fund on the list.
The fund seeks tax-free income by investing in investment-grade municipal bonds with income that’s exempt from federal personal income tax.
The fund is run by six portfolio managers with an average tenure of 1.8 years. Mark Paris, Chief Investment Officer and Head of Municipal Strategies, has the longest tenure at 2.5 years. Before joining Invesco, Mr. Paris was a trader and then a portfolio manager for the municipal fixed income team at Morgan Stanley and Van Kempen.
The fund’s portfolio consists of more than 800 municipal bonds with an effective duration of nine years and an average credit quality of BBB. The top ten holdings account for about 11% of total assets, while the portfolio had about 24% turnover. These dynamics make it the most diverse fund on the list, albeit with the highest turnover.
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2. BlackRock New York Municipal Opportunities Fund (MDNKX)
The BlackRock New York Municipal Opportunities Fund (MDNKX) comes second. It generated a one-year trailing return of 5.71% with a 0.64% expense ratio and a 2.29% yield, making it the lowest cost and lowest yielding fund on the list.
The fund takes a flexible approach to manage interest rate and credit risk while providing a compelling combination of attractive tax-advantaged income, returns, and meaningful downside protection.
The fund is run by four portfolio managers with an average tenure of nine years. Theodore R. Jaeckel, a Managing Director at BlackRock, has the longest tenure at 15 years. Mr. Jaeckel joined BlackRock following the merger with Merrill Lynch Investment Managers in 2006.
The fund’s portfolio consists of about 530 municipal bonds with an effective duration of five years and an average credit quality of A. The top ten holdings account for about 12% of total assets, while the portfolio has about 15% turnover. These dynamics make it the fund with the highest credit rating and lowest duration, translating to less risk for investors.
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3. Invesco Rochester AMT-Free New York Municipal Fund (OPNYX)
The Invesco Rochester AMT-Free New York Municipal Fund (OPNYX) rounds out the list. It has a one-year trailing return of 5.37% with a 0.97% expense ratio and a 2.85% yield, making it the most expensive fund on the list.
The fund invests in investment-grade municipal bonds with income exempt from federal, New York State, and New York City personal income taxes and the federal alternative minimum tax.
The fund is run by six portfolio managers with an average tenure of four years. Michael L. Camarella, Vice President and Senior Portfolio Manager, has the longest tenure at about 15 years. The other four portfolio managers have been with the fund for less than three years.
The fund’s portfolio consists of about 400 bonds with an effective duration of 8.4 years and an average credit rating of BBB. The top ten holdings account for about 18% of total assets, while the portfolio has about 15% turnover.
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The Bottom Line
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Note: Data as of December 9, 2021.