Muni Bond Funds
Bonds or fixed incomes should be part of asset diversification for every investor. Bonds have enjoyed the longest bull market for the past two decade. In general, bonds can be categorized into 2 classes: tax free bonds or muni bonds and taxable bonds. Investing in bonds can be done through mutual funds, exchange traded funds, and individual bonds. Bond mutual funds are among the popular vehicle for investment. There several reasons to invest in bond funds:- It provides instant diversification in various bonds
- Investor has instant access to experienced manager(s)
- It provides regular income
- It can participate in limited capital appreciation with less volatility
Top Performing Funds
Muni Bond fund is mutual fund consists of various municipal bonds. This bond income is usually tax exempt from federal tax rate and possible state tax or local tax. The most popular one is diversified national municipal bond fund. This type of fund usually consists of bonds from variety of municipalities such as California, Texas, New Jersey, New York, Minnesota, Illinois, etc. More details about this Muni bond fund on my previous article. Other alternative is to invest in Best Municipal bond closed end fund.
The following list is sorted based on the fund’s YTD performance. These Municipal bond funds are part of national municipal bond funds (i.e. no single state Muni). The funds can be classified either as short term Muni, intermediate term Muni, long term Muni, and high yield Muni.Best performing municipal bond mutual funds of 2013 are:
- Pioneer High Income Municipal fund (PIMAX)
- Nuveen High Yield Municipal Bond Fund (NHMAX)
- Oppenheimer Rochester National Muni fund (ORNAX)
- Oppenheimer AMT-Free Municipals fund (OPTAX)
The 3 best performing municipal bond mutual funds 2012 are:
- SEI Tax-Exempt Tax-Advantaged Income Fund
- Performance Trust Municipal Bond Fund
- Eaton Vance National Municipal Income Fund
- Nuveen High Yield Municipal Bond Fund (NHMAX)
- Pioneer High Income Municipal Fund (PIMAX)
- Oppenheimer AMT-Free Municipals Fund (OPTAX)
Top Performing Tax Free Bond Funds
Six Top Performing National Municipal Bond Mutual Funds May 2011:- Eaton Vance Tax-Advantaged Bond Strategies Long Term A (EALTX)
- Eaton Vance Tax-Advantaged Bond Strategies Intermediate Term A (EITAX)
- Lord Abbett AMT Free Municipal Bond A
- PIMCO Tax Managed Real Return A
- TIAA-CREF Tax-Exempt Bond Retail
- JPMorgan Tax Aware Real Return A
Eaton Vance Tax-Advantaged Bond Strategies Long Term A
As the top performing funds in Municipal Bond category, this Eaton Vance Tax-Advantaged Bond Strategies Long Term fund seeks after-tax total return. The fund invests >80% of net assets in a diversified portfolio of municipal debts that are exempt from regular federal income tax, direct obligations of the U.S. Treasury and/or obligations of U.S. Government agencies, and GSE. It may invest some of its net assets (<20%) in Municipal Securities rated A at the purchase time. |
| EALTX characteristics |
Since January 2010, James H. Evans is the lead manager of this Eaton Vance fund. The fund also has the smallest net asset with $2.36 million. The annual expense ratio is 0.95%. As part of load fund, this fund also charge 4.75% front end sales load. There is no management fee. Morningstar hasn’t rated this fund yet since it is relatively new fund. The current yield of this fund is 2.62%.
For 2011 Year-To-Date, this Eaton Vance Tax-Advantaged Bond Strategies Long Term fund has returned 7.40%. If you are interested in lower fee of this fund, you can also invest in other fund classes: Class A Load Waived (EALTX.LW), Class C (EILTX), and Class I (ECLTX). You can purchase this fund from several brokerages like Pershing FundCenter, Fidelity Retail FundNetwork, Raymond James, TD Ameritrade NTF, Ameriprise Brokerage, Waddell & Reed, etc.
As of April 2011, this best muni bond fund portfolio composition is general obligation bonds (37.57%), utility bonds (19.55%), short term / cash (14.78%), education bonds (12.27%), public facilities (4.52%), other revenue bonds (4.53%), transportation bonds (2.02%), and insured bonds (4.77%). The fund also has an average duration of 6.65 years. There are 26 issuers. Top 5 bond issuers include Seattle Wash Wtr Sys Rev, Massachusetts St Wtr Res Auth, Charleston S C Wtrwks & Swr Re, New York St Dorm Auth St Pers, and Colorado Springs Colo Utils.
Eaton Vance Tax-Advantaged Bond Strategies Intermediate Term A
With $50 million net assets, this Eaton Vance Tax-Advantaged Bond Strategies Intermediate Term is the second Eaton Vance fund in this top performers list. This fund objective is to achieve after tax total return. The fund usually invests majority of net assets (>80%) in a diversified portfolio of municipal obligations that are exempt from regular federal income tax. It normally invests in Municipal Securities rated in the two highest rating categories (those rated AA or Aa or higher) at purchase time. This EITAX fund also may invest <30% of net assets in Municipal Securities rated A.
Similar to previous Eaton Vance fund, this fund is also managed by James H. Evans since January 2010. Since it is new fund, it hasn’t received Morningstar rating. The fund expense ratio is 0.95% per year. It also has 2.25% sales load. Investor can also invest in other asset classes such as EITAX.LW (No Load Class A), EITCX (Class C), and STIIX (Class I). These classes may offer lower fees. The fund also has distribution rate of 1.3%.
More top performer can be found in my MEPB Financial website.
As of April 2011, this Eaton Vance fund consists of 41 holdings. The fund’s average maturity is 8.17 years and its average duration is 5.59 years. Top 2 sectors of this EV fund include State & Muni Bonds (84.08%), and Cash & Equivalents (15.95%). The top 6 bond holdings include Florida St GO, Gwinnett County GA Sch Dist GO, Massachusetts St Fin Agy (Boston College), Leander TX Sch Dist GO, Cook County IL Sch Dist GO, and Loudoun County VA Water & Sewer Rev.
Lord Abbett AMT Free Municipal Bond A
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| Lord Abbett AMT Free Muni Bond |
The fund also has dividend yield of 4.64%. The expense ratio of this Lord Abbett fund is 0.50% per year. It also has 0.20% management fee and 2.25% sales load fee. As one of the new fund, it doesn’t have any Morningstar rating. To invest in this fund, you will need $1,000 minimum investment. This fund is opened to any investors. It is also categorized as Muni National Long Bond fund.
Hence this LATAX fund is part of load fund as well; you can also select other classes to find better investment choice with lower fees. The other classes are: Class C (LATCX), Class F (LATFX), and Class I (LMCIX).
The top 10 sectors in this fund portfolio as of May 2011 are healthcare / hospital, insured bond, transportation, education, IDR/PCR, lease, special tax, GO local, water & sewer, tobacco, and VRDN. This Lord Abbett AMT Free Municipal Bond consists of 199 bonds. The fund has a modified duration of 8.7 years and an average coupon of 5.1%.
PIMCO Tax Managed Real Return A
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| PTXAX fund details |
The fund invests >50% of assets in debt securities whose interest is exempt from federal income tax and the rest of assets are invested in inflation-indexed bonds of varying maturities issued by the U.S. government and its agencies. This fund may use forwards or derivatives such as options, futures contracts or swap agreements (such as CPI swaps) to enhance the fund performance.
Since October 2009, this top performing municipal bond fund has been managed by John Cummings. The fund net assets are $41.25 million. The annual expense ratio is 0.85%. This fund also has 3.75% front end sales load and 0.25% 12b1 fee. Since it is relatively new fund, Morningstar hasn’t rated this fund yet. The dividend yield of this fund is 1.43%.
For 2011 Year-To-Date, this PIMCO Tax Managed Real Return fund has returned 5.03%. Other classes of this PIMCO fund are Class C (PXMCX), Class D (PXMDX), Institutional Class (PTMIX), and Class P (PTMPX). PTTAX can be purchased from 18 brokerages like JPMorgan, Pershing FundCenter, Schwab RPS, Raymond James, Thrivent Advisory Eligible, Scottrade, etc.
As of April 2011, it has effective duration of 2.15 years and effective maturity of 5.31 years. The top 5 municipal sectors are State / Local General Obligation, Special Tax, Education Revenue, Water & Sewer, and Power Revenue.
TIAA-CREF Tax-Exempt Bond Retail
As part of no load fund, the TIAA-CREF Tax-Exempt Bond fund is seeking a high level of tax free current income from regular federal income tax, consistent with preservation of capital. The fund invests most of assets (>80%) in tax-exempt bonds (i.e. municipal bonds). It also invests <20% of assets in private activity bonds. The fund may invest some of assets (<20%) in below investment-grade securities or junk bonds. |
| TIXRX fund characteristics |
Peter Scola is the fund lead manager. The fund also has dividend yield of 3.52%. The expense ratio of this TIAA-CREF fund is 0.49% per year. This fund also receives 4 stars rating from Morningstar. The minimum initial investment is $2,500 for brokerage account. This fund is opened to any investors. It is also categorized as Muni National Intermediate Bond fund. The turnover rate is 49%.
The top 7 sectors in this fund portfolio as of April 2011 are general obligation (32%), misc revenue (20%), education (12%), water/waste (12%), transportation (10%), health (4%), and industrial (3.8%). This consists of 248 holdings. The fund has an option-adjusted duration of 6.95 years and an average maturity of 9.1 years.
JPMorgan Tax Aware Real Return A
With $3,118 net assets, this JPMorgan Tax Aware Real Return fund is one of the largest funds in this top performing municipal bond mutual funds list. This JPMorgan investment fund seeks to maximize after-tax inflation protected return. The fund usually invests in municipal bonds. It also seeks after tax return through investment in derivative instrument such as inflation-linked swaps.Currently this JPMorgan mutual fund manager is Deepa D. Majmudar. The fund’s annual expense ratio is 0.74%. As part of load fund, this municipal bond mutual fund also charge 3.75% front end sales load. There is also 0.25% 12b1 fee. Morningstar gave 1 star rating for this fund. The current yield of this fund is 2.38%. The fund has 675 bonds in its holding. The fund average effective duration is 2.87 years. The average credit quality of this fund is AA (investment grade).
Other classes of this fund include Class C (TXRCX), Select Class (TXRSX), and Institutional Class (TXRIX)
Franklin Federal Tax-Free Income A
Franklin Federal Tax-Free Income fund objective is to achieve high level of income exempt from federal income taxes as is consistent with prudent investment management and the preservation of shareholders' capital. The fund usually invests most of its assets (>80%) in investment grade municipal bonds. The fund also may invest in insured municipal obligations and municipal lease debts.The fund has returned -3.50% over the past year and 2.81% over the past five years. For this ticker, FKTIX, it currently has a max front end sales load of 4.25% and max 12b1 fee of 0.09%. The total expense ratio is currently at 0.61% per year. Other tickers may not have these fees and has a lower expense ratio fees such as FFTBX, FRFTX and FAFTX. For ticker, FAFTX, there is no front end sales load and 12b1 fee. FAFTX also only has 0.52% annual expense ratio.
Disclosure: No Position
Muni Bond Fund Information
| No | Fund Name | Ticker | Rating | Yield | YTD Return | Expense Ratio | Load | Net Assets (mil) | Min to Invest |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Eaton Vance Tx-Advntgd Bd Strat Lg Trm A | EALTX | N/A | 2.62% | 7.40% | 0.95% | 4.75% | $3 | $1,000 |
| 2 | Eaton Vance TxAdvtg Bd Strat IntermTrm A | EITAX | N/A | 1.30% | 5.67% | 0.96% | 2.25% | $50 | $1,000 |
| 3 | Lord Abbett AMT Free Municipal Bond A | LATAX | N/A | N/A | 5.12% | 0.50% | 2.25% | $40 | $1,000 |
| 4 | PIMCO Tax Managed Real Return A | PTXAX | N/A | 1.43% | 5.03% | 0.85% | 3.75% | $41 | $1,000 |
| 5 | TIAA-CREF Tax-Exempt Bond Retail | TIXRX | 4 | 3.52% | 4.86% | 0.49% | 0.00% | $301 | $2,500 |
| 6 | JPMorgan Tax Aware Real Return A | TXRAX | 1 | 2.38% | 4.73% | 0.74% | 3.75% | $3,118 | $1,000 |
| 7 | Northern Tax-Exempt | NOTEX | 4 | 3.77% | 4.69% | 0.75% | 0.00% | $952 | $2,500 |
| 8 | ActivePassive Intermediate Muni Bond A | APMUX | 1 | 2.49% | 4.67% | 1.00% | 5.75% | $16 | $1,000 |
| 9 | Franklin Federal Tax-Free Income A | FKTIX | 3 | 4.47% | 4.61% | 0.61% | 4.25% | $10,310 | $1,000 |
| 10 | State Farm Tax Advantaged Bond A | TANAX | 4 | 3.36% | 4.61% | 0.68% | 3.00% | $256 | $250 |
| 11 | BlackRock Municipal Inv A | MDMIX | 3 | 4.65% | 4.54% | 0.72% | 4.25% | $708 | $1,000 |
| 12 | Oppenheimer AMT-Free Municipals A | OPTAX | 1 | 7.13% | 4.52% | 0.94% | 4.75% | $2,056 | $1,000 |
Fund Performance (2013)
| No | Fund Description | Ticker | Rating | Expense Ratio | 3-Year Return % | 5-Year Return % |
|---|---|---|---|---|---|---|
| 1 | Bernstein Diversified Municipal | SNDPX | 5 | 0.56 | 3.9 | 4.47 |
| 2 | USAA Tax Exempt Intermediate-Term | USATX | 5 | 0.54 | 6.46 | 6.48 |
| 3 | Wells Fargo Advantage S/T Muni Bd Inv | STSMX | 5 | 0.63 | 2.51 | 3.46 |
| 4 | Vanguard High-Yield Tax-Exempt | VWAHX | 5 | 0.2 | 7.36 | 6.68 |
| 5 | T. Rowe Price Summit Municipal Inc | PRINX | 5 | 0.5 | 7.37 | 6.97 |
| 6 | Wells Fargo Advantage Municipal Bond Inv | SXFIX | 5 | 0.78 | 7.72 | 7.45 |
| 7 | Wells Fargo Advantage Interm T/AmtF Inv | SIMBX | 5 | 0.73 | 6.05 | 5.88 |
| 8 | SEI Tax-Exempt Tax-Advantaged Income A | SEATX | 5 | 0.87 | 8.56 | 7.16 |
| 9 | GuideMark Tax-Exempt Fixed Inc Service | GMTEX | 5 | 1.29 | 5.52 | 5.48 |
| 10 | BNY Mellon Municipal Opportunities Inv | MOTIX | 5 | 0.93 | 8.07 | N/A |
| 11 | American Funds Tax-Exempt Bond A | AFTEX | 4 | 0.55 | 6.77 | 6.14 |
| 12 | Vanguard Interm-Term Tx-Ex Inv | VWITX | 4 | 0.2 | 5.51 | 5.83 |
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