In fixed income, over the long run, yield drives total return. In municipal bonds that yield may carry additional tax-efficiency benefits. This high yield municipal bond strategy, available in a separately managed account (SMA), is designed to achieve strong long term total returns derived primarily, if not entirely, from the income produced by the securities held in a given portfolio, much like how the S&P 500’s long term total return has been materially attributed to reinvested dividend income.
The foundation of the process by which portfolios are constructed is an intensive, comprehensive reliance on bottom-up credit analysis. We take the time and make the effort to understand not just the basic profile of a given credit, but also its risk profile, and what remedies are available to us as lenders in the event something goes awry. Subsequently, specific security selection analysis is conducted on a strict relative value basis. This step is critical in an over-the-counter environment such as the municipal bond market. We are not taking risk indiscriminately. We’re striving to adequately compensate shareholders for the risk we take, in a marketplace that affords the professional manager ample opportunities to exploit inefficiencies inherent to that market.
Our aim with this approach is to build portfolios that provide above-market yields so to justify the risk (absolute and relative) represented in the credits behind the securities we select for inclusion.
Our high income federal tax exempt fund is managed by the Municipal Bond Strategies team. Drawing on over 130 years of industry experience, from firms both big and small, the team is focused on building diversified portfolios that deliver long-term, yield-driven total return. The process is based upon comprehensive bottom-up credit analysis and relative value-based security selection. We do not peg to an index, and we do not forecast interest rates. We are truly active portfolio managers.
We believe this strategy can offer investors the following:
130+ years in the industry
Investment thesis/process has evolved to match modern investors’ needs
Comprehensive approach to risk and portfolio dynamics
We do one thing: Build municipal bond portfolios
Long-standing relationships ensures access to opportunities
Team is poised to react to opportunity as it occurs
We pledge to maintain open and frank communication with investors to inform them of how current market dynamics dictate changes or realities at the portfolio or security levels.
We view as our job to fight for the best outcome for a given security on behalf of our clients. This does not mean cutting and running just because a credit falls on hard times, but working hard to drive the best-possible result in the event troubles occur.
Operating in a unique, over-the-counter market, where liquidity is top of mind, buy/sell decisions must be made based on the relative risk/reward dynamics for opportunities afforded in any given day. The difference between intrinsic and market value of a security can be vast in the inefficient municipal bond market. It’s our job to be pragmatic, not pie-in-the-sky.
We feel the advantages of being a small, highly action-oriented team – unencumbered by the proficiency sapping trappings of self-justification to which the big box managers inevitably fall prey – allows us to react to the fleeting moments of opportunity that typify the municipal bond market.
We want to spend our time working on problems that we can solve, with obvious benefit to our investors. For this reason we eschew top-down dictates and mandates that tend to be both myopic and difficult to successfully execute.
We recognize the value to being willing and able to evaluate and evolve your position when you’re dealing with a market as idiosyncratic and ever-shifting as the municipal bond market.
**Income may be subject to state or local income tax and a portion of income may be subject to the federal alternative minimum tax for certain investors. Federal income tax rules will apply to any capital gains distributions.
*The correlation coefficient is a measure that determines the degree to which two variables’ movements are associated. The range of values for the correlation coefficient is -1.0 to 1.0. A correlation of -1.0 indicates a perfect negative correlation, while a correlation of 1.0 indicates a perfect positive correlation.
Diversification does not assure a profit or protect against a loss in a declining market.