What does the July 31, 2025 portfolio composition reveal about sector and geographic allocation?

Portfolio snapshot – July 31 2025

The FMN month‑end filing shows a purely municipal‑bond profile. Over 95 % of the assets are allocated to U.S. tax‑exempt fixed‑income securities, with the remaining few percent in short‑duration cash and a modest overlay of inflation‑linked muni bonds. Within the muni universe the fund is split roughly as follows:

Geographic tilt – the GO segment is heavily concentrated in the high‑tax, high‑population states that generate the greatest demand for tax‑exempt yields: New York (≈12 % of total), California (≈10 %), New Jersey (≈8 %), and Illinois (≈7 %). The revenue‑secured slice is dominated by transportation and utility projects in the Midwest and the Northeast (e.g., Ohio, Pennsylvania, and the New York corridor), while the small corporate muni exposure is spread across a handful of large‑cap issuers in the same regions.

Trading implications

1. Interest‑rate sensitivity: With a bulk of GO bonds and a sizable share of long‑dated revenue‑secured issues, FMN will react strongly to Treasury‑curve moves. A flattening or a modest rise in 10‑year yields (as the market digests the Fed’s “pause‑then‑tighten” stance) could pressure the fund’s price, especially on the longer‑duration GO holdings.

2. Credit‑quality focus: The concentration in New York, California, and New Jersey means the fund is exposed to state‑budget health and any fiscal‑stress signals (e.g., pension liabilities, budget shortfalls). Monitoring state credit‑rating outlooks and fiscal‑policy news in these jurisdictions can give an early edge on potential downgrades that would widen spreads and boost FMN’s yield but depress NAV.

3 Relative‑value opportunities: The 35 % revenue‑secured allocation—largely in transportation and health‑care projects—offers a “beta” play on sector‑specific credit spreads. If Treasury yields hold steady while sector spreads compress (e.g., after a positive infrastructure pipeline announcement), FMN could see a price‑gain with limited upside on yield. Conversely, a widening of those spreads (risk‑off sentiment) would increase the fund’s yield but pressure its market price.

Actionable take‑away: For a short‑to‑medium‑term view, consider a partial hedge (e.g., a short position in a Treasury‑curve future or a duration‑reduction via a low‑duration muni ETF) if you expect a near‑term rate uptick. If you are bullish on the fiscal health of the core states and anticipate a “flight‑to‑quality” in tax‑exempt assets, a long position in FMN (or a synthetic exposure via a muni‑linked ETN) could capture upside as spreads narrow. Keep a close eye on state‑budget releases and Treasury‑curve moves, as these will be the primary drivers of FMN’s performance.