The municipal bond market is inefficient, fractured and constantly in flux, and active muni investors are much better equipped than passive ones to navigate it.
In fact, we believe that active muni investing can meaningfully improve investment outcomes.
We found that, historically, an astonishing 98% of active muni strategies outperformed passive approaches over rolling three-year periods. And 87% outperformed passive strategies over two-year periods. Plus, active strategies may deliver better upside and downside capture through some very volatile markets.
We believe that three kinds of portfolio strategies drive most of the active muni manager’s edge: yield-curve and duration positioning, municipal credit selection, and dynamic sector rotation, especially into Treasuries.
Volatile markets in particular present opportunities for nimble investors. Through small, ongoing portfolio adjustments, active muni investors can better manage risks and capture opportunities as they arise. Passive approaches cannot.