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A Top High-Yield Municipal Bond Fund

Kenneth Oshodi

Kenneth Oshodi: High-yield municipal bond funds have gotten a lot of attention lately, and one of the better offerings among this group is MainStay High Yield Municipal Bond.

Its team is led by five portfolio managers--Bob DiMella, John Loffredo, Mike Petty, Dave Dowden, and Scott Sprauer--who have a working relationship that dates back to their time at Merrill Lynch Investment Managers two decades ago. It was there that they developed the multifaceted investment process that they use to this day. This process includes macro analysis, sector rotation, and fundamental credit analysis. While it has led to longer duration as well as above-average exposure to troubled credits like Puerto Rico and tobacco--when compared to peers--an experienced team and good security selection has helped this fund to navigate those areas and be among the best investments in the Morningstar high-yield municipal bond category.

Since its March 2010 inception, it has performed very favorably versus its peer group thanks to strong security selection and astute top-down calls.

Although this fund has an average expense ratio, the combination of a seasoned team, strong long-term record, and an effective process lead to its Morningstar Analyst Rating of Bronze.