FAAR vs FMN
First Trust Alternative Absolute Return Strategy ETF vs Federated Hermes Premier Municipal Income Fund
Quick Verdict
FMN has a lower expense ratio. FAAR delivered stronger 1-year returns. FMN offers more diversification with 150 holdings.
Side-by-Side Comparison
| Metric | FAAR | FMN | Winner |
|---|---|---|---|
| Expense Ratio | 0.98% | 0.75% | |
| AUM | $203M | $16M | |
| Dividend Yield | 9.89% | 4.43% | |
| Holdings | 5 | 150 | |
| YTD Return | +15.32% | +2.77% | |
| 1Y Return | +18.67% | +9.06% | |
| 3Y Return (annualized) | +8.79% | +7.46% | |
| 5Y Return (annualized) | +7.72% | -2.90% | |
| Volatility (annualized) | 9.2% | 14.7% | |
| Max Drawdown | -18.8% | -53.4% | |
| Fund Family | First Trust Portfolios (US) | Federated Hermes | |
| Category | Commodity | Tax Preferred | |
| Inception | May 18, 2016 | Dec 20, 2002 |
FAAR vs FMN Performance
First Trust Alternative Absolute Return Strategy ETF (FAAR) is a ETF from First Trust Portfolios (US) and Federated Hermes Premier Municipal Income Fund (FMN) is a ETF from Federated Hermes. Over the past year FAAR returned +18.67% while FMN returned +9.06%. Year to date, FAAR is up 15.32% versus a gain of 2.77% for FMN.
Over three years, FAAR compounded at +8.79% per year against +7.46% for FMN; over five years the annualized figures are +7.72% and -2.90% respectively. Across the full 10-year window we track, FAAR has the edge at +3.43% annualized vs -0.24%. Past performance does not guarantee future results.
Risk: Volatility and Drawdowns
FMN has been the more volatile fund, with annualized monthly volatility of 14.7% compared with 9.2% for FAAR. Lower volatility generally means a smoother ride, though it often comes with lower long-run returns.
The deepest peak-to-trough decline in our data was -18.8% for FAAR and -53.4% for FMN. Drawdown depth is worth weighing if you expect to sell during market stress rather than ride it out.
The two funds' monthly returns correlate at -0.09. They move independently enough that combining them can meaningfully diversify a portfolio.
Fees and Cost Over Time
FAAR charges 0.98% per year while FMN charges 0.75%. On a $10,000 position that is $98 vs $75 annually, a gap of $23 per year that compounds over a long holding period. On income, FAAR currently yields 9.89% against 4.43% for FMN.
Holdings Overlap
FAAR and FMN share 0 holdings out of 86 unique holdings combined, representing a 0.0% weight overlap.
Moderate overlap means holding both could provide meaningful diversification benefits.
Frequently Asked Questions
Which is cheaper, FAAR or FMN?
FAAR has an expense ratio of 0.98% while FMN charges 0.75%. FMN is the cheaper option. On a $10,000 investment, that is $23 per year of difference.
Which performed better, FAAR or FMN?
Over the past year FAAR returned +18.67% vs +9.06% for FMN, so FAAR leads on 1-year performance. Over the longest common window we track (10 years), FAAR annualized +3.43% vs -0.24% for FMN. Past performance does not guarantee future results.
Which is riskier, FAAR or FMN?
FMN has been the more volatile fund at 14.7% annualized versus 9.2% for FAAR. Worst drawdown: FAAR -18.8% vs FMN -53.4%.
Should I hold both FAAR and FMN?
FAAR and FMN have a monthly-return correlation of -0.09, so combining them can provide real diversification depending on your allocation goals.
What is the holdings overlap between FAAR and FMN?
FAAR and FMN share 0 common holdings with a 0.0% weight overlap. Combined, they hold 86 unique securities.
Which pays a higher dividend, FAAR or FMN?
FAAR yields 9.89% while FMN yields 4.43%, so FAAR currently pays the higher dividend yield.
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