Solutions for Your Tax-Advantaged Fixed-Income Needs

Market information and perspective are crucial to delivering risk-adjusted returns. Most people are seeking efficient use of investment funds while holding safety of principal as paramount. Return, independent of risk quantification, can be meaningless. The efficiency of the return relative to the risk taken is the true measure of success.

Our Approach

Essential Purpose Philosophy – Buy bonds used to support basic/essential municipal functions.

Risk Focused Approach – Hold lower-rated credits in the shorter segment of the portfolio and more liquid/pristine credits in the longer portion of the portfolio. This results in a more clear realization of credit risk and interest rate risk (aiming to dampen overall portfolio price volatility).

The Numbers Behind the Approach

Various studies have shown that essential purpose municipal bonds have a historical default rate of between 0.03% and 0.25%, making them crucial to a low risk municipal bond portfolio. The chart compares that with the average default rates for other types of municipal bonds. Most of our clients appreciate the trade-off between owning essential purpose municipal bonds, with yields that can approximate 80 to 90 percent of non-hospital health care (nursing home) bonds and only a small fraction of the default rate. It is worth noting that similarly rated corporate obligations have had nearly fifteen times the historical default rate as essential purpose municipal bonds.*