ETF Evaluator: First Trust Municipal High Income ETF () Follow This ETF

First Trust Municipal High Income ETF Overview

First Trust Municipal High Income ETF (FMHI) is an actively managed Municipal Bond High Yield Muni exchange-traded fund (ETF). First Trust launched the ETF in 2017.

The investment seeks to provide federally tax-exempt income; the secondary objective will be long-term capital appreciation. Under normal market conditions, the fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in municipal debt securities that pay interest that is exempt from regular federal income taxes. Municipal securities are generally issued by or on behalf of states, territories or possessions of the U.S. and the District of Columbia and their political subdivisions, agencies, authorities and other instrumentalities.

About First Trust Municipal High Income ETF (FMHI)

There are 3 members of the management team with an average tenure of 5.13 years: Johnathan Wilhelm (2017), Shawn O'Leary (2024) and Thomas Byron (2022). Management tenure is more important for actively managed ETFs than passive index ETFs.

The ETF has 3 primary benchmarks: Bloomberg Municipal TR USD index with a weighting of 100%, Bloomberg HY 10-Y Municipal TR USD index with a weighting of 50% and Bloomberg Revenue 10-Y Municipal TR USD index with a weighting of 50%. First Trust Municipal High Income ETF has 732 securities in its portfolio. The top 10 holdings constitute 5.0% of the ETF’s assets. The ETF meets the SEC requirement of being classified as a diversified fund. The ETF is not considered to have an ESG focus with its investment selection and management.

First Trust Municipal High Income ETF is part of the Fixed Income global asset class and is within the Municipal Bond ETF group. First Trust Municipal High Income ETF has 2.6% of its portfolio invested in foreign issues. The overall assets allocated to domestic stock is 0.0% There is 0.0% allocated to foreign stock, and 0.0% is allocated to preferred stocks. The bond allocation as a percentage of total assets is 98.7% (96.1% domestic bond, 2.6% foreign bond and 0.0% convertible bond). First Trust Municipal High Income ETF has 1.3% of the portfolio in cash.

Assets Under Management

The fund has $994 million in total assets, which is above the $990 million average for the High Yield Muni category. Normally, lower assets under management translates to higher average expense ratios, and greater total assets are desired. However, for some investment categories, such as small-cap investing, it may be difficult for the manager to fully employ the desired active strategy if assets grow too large or too quickly.

FMHI Performance and Fees

The expense ratio measures how much of a fund’s assets are used for administrative expenses and operating expenses, including adviser fees and fees for the transfer agent and custodial services. The First Trust Municipal High Income ETF expense ratio is average compared to funds in the High Yield Muni category. First Trust Municipal High Income ETF has an expense ratio of 0.49%, which is 18% lower than its category average, making the fund expense ratio grade a D. While it is difficult to predict returns, it is known that high annual expense ratios reduce your rate of return, and excessive fees are difficult to overcome. Active management normally comes with higher expense ratios than passive index management. Certain investment categories such as small company and foreign also normally have higher expense ratios. It is best to compare fund expense ratios against the category averages for meaningful assessments.

High portfolio turnover can translate to higher expenses and lower aftertax returns. First Trust Municipal High Income ETF has a portfolio turnover rate of 38%, which indicates that it holds its assets around / 0.0 years. By way of comparison, the average portfolio turnover is 38% for the High Yield Muni category.

Recently, in the month of July 2026, First Trust Municipal High Income ETF returned -1.6%, which earned it a grade of B, as the High Yield Muni category had an average return of -1.8%. The letter grades of A, B, C, D and F are based upon relative rankings within the investment category. A grade of A, for example, would indicate that the return is in the highest 20% for that time period compared to all ETFs in that category.

First Trust Municipal High Income ETF has a trailing yield of 4.35%, which is below the 4.58% category average. The fund normally distributes its income monthly and its capital gains annually.

It’s natural to seek the best-performing investments, but you must consider the relationship between risk and return and the impact of costs and taxes on your realized returns.

First Trust Municipal High Income ETF Grades

Year to date, the ETF has returned 1.9%, 0.0 percentage points better than the category, which translates into a grade of C. The fund has returned 7.6% over the past year (grade of C), 4.6% over the past three years (grade of C) and 0.4% per year over the past five years (grade of C).

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