At a glance
FMHI charges 0.7% a year, above the 0.29% average of the 7 funds most like it (the most expensive of 8). It has $994.3M in assets, the 8th largest of that group; it paid 5.0% of its price in distributions over the past 12 months, monthly. Over the past year it returned +0.2% with distributions reinvested, 2nd of those 8 funds; over three years it returned +5.8% a year. At its worst it fell 16.7% in the 2020 crash (S&P 500: 33.7%) and 17.2% in the 2022 bear market (S&P 500: 24.5%), and was back at its earlier high 9 months and 37 months after the lows. Its ten largest positions make up 5.0% of the fund, out of 732 in all.
The short version
First Trust Municipal High Income ETF (FMHI) is an actively managed fund. It holds mostly municipal bonds whose interest is free of regular federal income tax, and at least half of them are rated below investment grade, also called “junk.” As of October 27, 2026, its trailing yield was about 5%, paid monthly, and its three-year return ranked first among eight similar funds. The trade-off is cost: its 0.70% expense ratio is more than double the 0.29% peer average.
Price history
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FMHI +0.2% over the year to Oct 27, 2026, total return with distributions reinvested.
How it has behaved
| YTD | 1 yr | 3 yr | 5 yr | 10 yr | Since start | |
|---|---|---|---|---|---|---|
| FMHI official prospectus, to Dec 31, 2024 | — | +5.58% | — | +1.58% | — | +3.03% |
| FMHI price data to Oct 27, 2026 | -0.4% | +0.2% | +5.8% | +0.3% | — | +2.8% |
- Over the year to Oct 27, 2026, FMHI returned +0.2%, 2nd of 8 among similar funds.
- Its 5-year annualized return was +0.3%.
- In the 2020 COVID crash it fell 16.7% and regained its old high 8.8 months after the low.
- Its worst full calendar year was 2022 (-14.7%); its best was 2019 (+10.4%).
- The deepest fall in its price history was 18.8% (Dec 30, 2021 to Oct 27, 2022), recovered by Dec 29, 2025.
Show as a table
| Year | Price data | Prospectus (official) |
|---|---|---|
| 2026 (to date) | -0.4% | — |
| 2025 | +3.9% | — |
| 2024 | +5.4% | +5.58% |
| 2023 | +7.2% | +7.26% |
| 2022 | -14.7% | -14.66% |
| 2021 | +7.6% | +7.60% |
| 2020 | +4.1% | +4.01% |
| 2019 | +10.4% | +10.58% |
| 2018 | +2.5% | +2.04% |
| 2008 financial crisis stocks fell Oct 9, 2007 – Mar 9, 2009 | Before this security existed |
|---|---|
| 2020 COVID crash stocks fell Feb 19, 2020 – Mar 23, 2020 | Lost 15.7% over that stretch · deepest drop along the way 16.7%, back to its old high 8.8 months after the low |
| 2022 bear market stocks fell Jan 3, 2022 – Oct 12, 2022 | Lost 16% over that stretch · deepest drop along the way 17.2%, back to its old high 37.4 months after the low |
Dividends and income
Show as a table
| Year | Per share | Change |
|---|---|---|
| 2026 (to date) | $1.7900 | |
| 2025 | $2.1700 | +13.0% |
| 2024 | $1.9200 | +3.8% |
| 2023 | $1.8500 | +12.1% |
| 2022 | $1.6500 | +1.9% |
| 2021 | $1.6200 | -3.6% |
| 2020 | $1.6800 | -6.7% |
| 2019 | $1.8000 | +3.4% |
| 2018 | $1.7400 |
What's inside
As of Jul 31, 2026, the fund held 732 securities; the ten largest made up 4.95% of assets.
| Holding | Weight | |
|---|---|---|
| PUERTO RICO AQUEDUCT AND SEWER AUTHORITY Bonds and notes | 0.58% | |
| CHICAGO ILL O HARE INTL ARPT Bonds and notes | 0.58% | |
| PUERTO RICO SALES TAX FINANCING CORP Bonds and notes | 0.58% | |
| MOBILE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (AL) Bonds and notes | 0.56% | |
| MOBILE INDUSTRIAL DEVELOPMENT BOARD (AL) Bonds and notes | 0.50% | |
| NEW YORK CITY MUNICIPAL WATER FINANCE AUTHORITY (NY) Bonds and notes | 0.47% | |
| ST. LOUIS COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (MO) Bonds and notes | 0.44% | |
| PUERTO RICO, COMMONWEALTH OF Bonds and notes | 0.41% | |
| SPRING VY CMNTY INFRASTRUCTURE DIST NO 1 IDAHO Bonds and notes | 0.41% | |
| ARKANSAS DEVELOPMENT FINANCE AUTHORITY (AR) Bonds and notes | 0.41% | |
| COLUMBUS REGIONAL AIRPORT AUTHORITY (OH) Bonds and notes | 0.39% | |
| MAIN STREET NATURAL GAS INC (GA) Bonds and notes | 0.39% | |
| CHARLOTTE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY (VA) Bonds and notes | 0.38% | |
| AMERICAN AIRLINES INC Bonds and notes | 0.38% | |
| MARYLAND ST HEALTH & HIGHER EDL FACS AUTH Bonds and notes | 0.38% |
By country
United States 98.82%By issuer
Municipalities 98.82%The bonds mature in 20.2 years on average (weighted by size), with an average coupon of 4.88%.
Source: N-PORT holdings report as of Jul 31, 2026. Cash, money-market funds and derivatives are shown separately from the securities list.What changed recently
- Over the three months to Jul 31, 2026, investors added a net $52.9M (creations minus redemptions, per the N-PORT report).
- Monthly total returns reported for that quarter: +0.72%, +1.07%, -1.55%.
How it works
FMHI does not track an index. First Trust's managers choose the bonds. The fund's main goal is income that is exempt from federal tax, and its second goal is long-term growth. At least 80% of its net assets go into municipal bonds issued by states, cities, territories and their agencies. These include general obligation bonds, which are backed by a government's taxing power. They also include revenue bonds, which are repaid from a specific project such as an airport or a water system, and private activity bonds, which fund projects tied to private companies.
Credit rules shape the portfolio. At least 50% of net assets must be rated below investment grade (below Baa3/BBB-), and no more than 50% can be investment grade. Up to 10% can go into bonds that are in default. The fund can buy bonds of any maturity. As of July 31, 2026, it held 732 bonds with an average of 20.2 years to maturity and an average coupon of 4.88%. The 10 largest positions made up just 4.95% of the fund. The biggest were bonds from the Puerto Rico Aqueduct and Sewer Authority, Chicago O'Hare airport and the Puerto Rico Sales Tax Financing Corp, at about 0.58% each.
The fund may use futures and other derivatives, but it reported none as of July 31, 2026. Its portfolio turnover was 38%. Most share creations and redemptions are settled in cash, so it may be less tax-efficient than ETFs that trade bonds in-kind.
What it really costs
- FMHI charges 0.7% a year, versus an average of 0.29% for the similar funds below (8th of 8, cheapest first).
Structure and tax notes
- Bond prices move opposite to interest rates; the longer the maturities it holds, the more its price reacts to rate changes.
In a retirement portfolio
Its main job is monthly, federally tax-exempt income from lower-rated municipal bonds, not growth or crash protection.
FMHI could add monthly tax-exempt income to a taxable account. Its trailing yield was about 5% ($2.30 per share) as of October 27, 2026. That income costs 0.70% a year, the highest fee among eight similar funds. The fund launched in 2017, so there is no 2008 record. During the 2020 COVID sell-off, it fell 16.7% in about two weeks and recovered by December 2020. When rates rose in 2022, it lost 14.66%, its worst calendar year. Its deepest drop was 18.8%, from December 2021 to October 2022, and it took about 38 months to recover. A retiree who sold shares in late 2022 to cover spending would have locked in much of that loss.
Long maturities and low credit ratings mean the fund can fall along with both bonds and riskier assets. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.
Who it may suit — and who should look elsewhere
May suit
- Investors in high tax brackets who want monthly, federally tax-exempt income from a fund yielding about 5% as of October 27, 2026.
- Investors who want an active manager picking among 732 mostly lower-rated municipal bonds, rather than an index, and accept a 0.70% fee for that.
- Taxable-account holders who could have sat through 2022, when the fund fell 18.8% from peak to trough and took about three years to recover.
Look elsewhere if
- Cost-focused investors: HYMB (0.35%) and HYD (0.32%) hold similar high-yield municipal bonds for about half of FMHI's 0.70% fee.
- Investors using IRAs or other tax-advantaged accounts, where tax-exempt interest adds little and lower-yielding municipal bonds lose their main advantage.
- People who need steady values or are subject to the alternative minimum tax, since some private activity bond income may be taxable for them.
Close alternatives
Matched by bond funds with the closest average maturity and issuer mix (N-PORT).
| Fund | Avg. maturity | Cost | Net assets | 1 yr | 3 yr |
|---|---|---|---|---|---|
| FMHI this fund | 20.2 yrs | 0.7% | $994.3M | +0.2% | +5.8% |
| HYMB SPDR Nuveen Bloomberg High Yield Municipal … | 20.5 yrs | 0.35% | $3.09B | -0.5% | +5.6% |
| HYD VanEck High Yield Muni ETF | 19.2 yrs | 0.32% | $4.43B | +0.9% | +5.5% |
| PZA Invesco National AMT-Free Municipal Bond ETF | 22.5 yrs | 0.28% | $4.24B | -2.7% | +3.8% |
| FMB First Trust Managed Municipal ETF | 15.5 yrs | 0.65% | $2.05B | 0.0% | +4.3% |
| TFI SPDR Nuveen Bloomberg Municipal Bond ETF | 15.1 yrs | 0.23% | $3.12B | -0.8% | +3.9% |
| JMUB JPMorgan Municipal ETF | 16.7 yrs | 0.18% | $8.75B | -0.2% | +4.4% |
| VTEB Vanguard Tax-Exempt Bond ETF | 14.5 yrs | 0.03% | $48.52B | +0.1% | +4.4% |
Questions investors ask
Does FMHI pay monthly dividends?
Yes. FMHI pays income monthly. Over the 12 months to October 27, 2026, it paid about $2.30 per share, a trailing yield of roughly 5%. The fund's main goal is income that is exempt from regular federal income tax. Some of its bonds are private activity bonds, however, and their interest may count toward the federal alternative minimum tax. State and local tax treatment can also differ, so the after-tax value depends on the holder's own situation.
What's the difference between FMHI and HYMB?
Both hold high-yield municipal bonds with similar long maturities. FMHI averaged 20.2 years as of July 31, 2026, against 20.5 years for HYMB. The main difference is approach and cost. FMHI is actively managed by First Trust and charges 0.70%. HYMB, the SPDR Nuveen Bloomberg High Yield Municipal Bond ETF, charges 0.35%. As of October 27, 2026, FMHI's three-year annualized return was 5.8% against HYMB's 5.6%. HYMB is also much larger, with about $3.1 billion in net assets.
Is FMHI a junk bond fund?
Largely, yes. FMHI must keep at least 50% of its net assets in municipal bonds rated below investment grade, often called junk, or in unrated bonds of similar quality. It can put up to 10% into bonds already in default, and no more than 50% in investment-grade bonds. Several of its largest holdings as of July 31, 2026, were Puerto Rico bonds. Even so, no single position was more than about 0.6% of the fund.
How much did FMHI lose in 2022?
FMHI lost 14.66% in 2022, its worst calendar year, according to its prospectus. Its weakest quarter was the first quarter of 2022, at −7.91%. Rising interest rates hurt long-maturity bonds, and lower-rated bonds fell further as investors demanded higher yields. From its December 2021 peak, the fund fell 18.8% by October 2022 and did not fully recover until December 29, 2025, about 38 months later. Its average annual return over the five years to December 31, 2024, was 1.58%.
What is FMHI's expense ratio?
FMHI's expense ratio is 0.70% a year, according to its prospectus filed November 28, 2025, and there is no fee waiver. That is the highest of the eight comparable municipal bond funds, whose average is 0.29%. HYD charges 0.32% and HYMB 0.35% for high-yield municipal exposure. Broader tax-exempt funds such as VTEB (0.03%) cost less still, but they hold more higher-rated bonds and follow a different strategy, so they aren't close substitutes.