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Whitepaper

Adapting to a Changing Municipal Landscape

May 12, 2021
Individual investors and financial advisors building municipal bond portfolios on their own face several challenges during rising interest rate environments. Those who take this route often wind up with poor investment performance that’s exacerbated by lingering uninvested cash balances. Factors such as heightened credit risk, limited access to bonds, large markups, and volatile interest rates have forced investors to reassess their municipal strategy to reduce risk.

At the same time, investors have taken notice of tax-exempt interest income from municipal bonds thanks to changing tax rates and new state and local tax deduction caps. An equally weighted portfolio of municipal bonds can provide investors with a more defensive portfolio structure than one with staggered allocations. This paper explores the reasons it’s important for investors to examine their tax-exempt allocation and how a professionally managed laddered approach to municipal bonds provides structure that can reduce risk and combat rising interest rates.

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Jim Evans, CFA

Chief Investment Officer, Fixed Income

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