Muni Bond Funds
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What are some of your guys’ favorite muni bond funds?
I don’t really feel I have a great muni manager. Also the yields compared to treasuries seem to justify the muni’s right now and they are still at a little discount.
Snaggletooth,
Anything available in a T share. I wrap it at 1%, take a 2% up front. Plus, I get the trails. It's a great way to build a business.[quote=NOVA]Snaggletooth,
Anything available in a T share. I wrap it at 1%, take a 2% up front. Plus, I get the trails. It's a great way to build a business.[/quote] Agreed.Oppco Rochester Munis are about all I use right now. The National and the AMT tax free. Both managed by the same guy, Ron Fielding.
I've looked at the Rochester National in the past. Do you know why they've taken such a big hit so far this year compared to other high yield funds? They seem somewhat more aggressive. Have your clients been ok with the volatility in this fund?Oppco Rochester Munis are about all I use right now. The National and the AMT tax free. Both managed by the same guy, Ron Fielding.
The funds are managed for current high income, not total return. Very little to no defense against a down market. They are at ground zero of the spread market. These funds act very much like an unmanaged portfolio of munis, the same as munis in any account in your book. Which is a good thing for income buyers. This manager isn’t afraid of this market and sees it for what it is. That is, a temporary down cycle. Thus he isn’t making the short term yield killing defensive moves that others are making to shield themselves, and to dress up their performance. What he is doing, as much as possible is grabbing up as many bonds as he can while prices are depressed. This will lead to gains down the road when the market turns as well as allowing the mgr to increase the monthly income distribution.
My clients are thrilled to be down in a muni fund. Not! Actually, the only reason to buy these funds is for tax free income today. They, in my opinion, shouldn't be added as part of an asset allocation mix in trying to balance a portfolio. In their primary roll as income producers they excell. My clients understand this and are on board with the reasoning behind owning these funds. They are owned strickly to give exposure to the income the high yield muni market can provide. This is an area we usually do not thread with individual munis. Lastly, the funds are very aggressive and thus may not be appropriate for the faint of heart. Mr. Fielding, backed by a crack reasearch team takes some out sized risks. If he turns out to be wrong it could be a big problem. I've been investing with him since 1990 and he hasn't been wrong yet. So, I'm totally comfortable with his style.How about buying individual muni's instead of the muni fund? For about the last 3 months muni yields are up, especially with the dislocation of the auction-rate market.
Also, municipals have to pay for ratings and that can be expensive. Unrated munis end up going to municipal bond portfolio managers who have the research analysts and sophistication to research the financials of the municipality. So, it is not a bad thing if a PM has unrated munis in their portfolio.