Tue, 27 Jan 2015
Going against the grain of flows can be a profitable strategy.
As the Fed intends to keep interest rates low for the next few years, muni - CEF investors should maintain a close watch on their funds' call exposure.
Despite the scare of recent bankruptcies and downgrades, municipalities have the resources to continue making bond payments, while looming tax increases likely won't affect muni demand, says Morningstar's Jeff Westergaard.
Increasing demand, tightening supply, and expectations for higher rates and inflation should bring better muni returns in the coming years, says Nuveen's John Miller, Puerto Rico notwithstanding.
As fixed-income CEFs appreciate, investors seeking yield should be cognizant of bond rollover into lower-yielding assets as well as the added risk of leverage, says RiverNorth's Patrick Galley.
Although the asset class saw some changes during the first six months of 2012, the numbers were somewhat similar to those at the 2011 midpoint.
Many fixed-income CEF investors are heading for the exits, but the movement is creating attractive discounts, says RiverNorth's Patrick Galley.
Despite their extra income, nonrated municipal bonds can expose investors to lower-credit-quality, less-liquid issues with a tremendous research requirement, says Morningstar's Eric Jacobson.
As investors ditched certain income-producing assets on worries of rising rates, an abundance of fixed-income CEFs moved into undervalued territory, according to Morningstar's Cara Esser.
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