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By Elizabeth Foos | 01-19-2016 12:00 AM

Slow-and-Steady Wins the Race for This Muni Fund

Although Gold-rated T. Rowe Price Tax-Free High Yield doesn't top its category in any one year, its long-term returns best nearly all peers by avoiding the muni market's riskiest pockets.

Beth Foos: Led by manager Jim Murphy, T. Rowe Price Tax-Free High Yield (PRFHX) aims to strike a balance between the high-yield muni category's most cautious and most aggressive players--and, so far, it's working.

The fund's experienced team, solid bottom-up research, and strong long-term results earn it a Morningstar Analyst Rating of Gold.

Murphy relies heavily on the firm's knowledgeable research, quantitative teams, and sophisticated analytic tools to help him select securities that provide yield with lower risk.

To that end, he keeps the fund's exposure to leveraged structures--like tender-option bonds--low and steers largely clear of the muni market's riskiest areas, such as tobacco and Puerto Rico bonds.

Instead, Murphy has kept a longtime focus on value-hunting and strong security selection in the healthcare sector and, more recently, in corporate-backed bonds to produce yield.

This fund's moderate approach has kept it from topping the high-yield muni category's ranks in any one year and can even provide a headwind when muni markets rally and more risk is rewarded.

But with that, this approach has provided protection when muni markets struggle and has produced solid returns with below-average volatility over longer periods.

The fund's 5.4% annualized return during the past 15 years beats almost all of its category rivals that have been around that long.

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