**typo- should read Closed end Muni Funds So I’m following a couple closed end muni funds that are selling at a ~35% to NAV and yielding ~10%. What should my concerns be? Are their any particular pointers anyone can provide as to what the dealbreakers might be? Administrator shows assets as well diversified (as well as a muni fund can be anyway) as far as regions, with no more than 1.5% of assets in any one note. Also average credit rating is A and its 25% pre-refunded. Do I need to be looking at maturity, callability, etc?? Thx for the pointers- I have no experience in this realm but it seams like a good opportunity considering tax free income.
I can think of 2 risks du jour some of them have leverage, and getting that leverage funded is getting more expensive. some muni markets are locked up (see auction rate securities). The principal on these bonds is fixed and they may be accounting for them at this fixed principal even though no one will buy them for that price. In fact, they could be stuck with some of these. Some I follow haven’t “cleared” in 3 months
virginCFAhooker Wrote: ------------------------------------------------------- Some I follow haven’t “cleared” in > 3 months Can you explain more please? What do you mean by ‘Cleared’? Is the NAV market to mkt? If so- is that value reliable?- any idea if its a daily recalculation?
Can I ask which state? I’ve been following Massachusetts bonds and funds for a while.
if the cef holds auction rate muni bonds then it is possible they are sitting on a bunch that aren’t liquid. Google around for stories about auction rate securities. A lot of them have been refi’d into traditional fixed term bonds but there are still a lot out there. Most of the ones that are left don’t have the egrigious penalty interest rates so the municipality has no motivation to refi.
I’m looking at CA. Virgin- When you are referring to auction rates, is the concern that the municipalities cannot get the cash to pay principal @ maturity? I plan on being in relatively LT, and its a closed end fund- so I guess that is the concern right? I guess that a longer average duration would be better than- meaning more time for credit mkts to relax before the notes start to mature?? Man, CFA was worthless in this area.
No one talks about paying principal… they always refi into bigger & bigger deals. The premises that you learned in CFA are good… remember G.O. vs. special purpose, etc. Also, you know about the CEF websites like CEFA and ETFconnect.
Let us know what you find! I live in CA, too!
looking at some PIMCO funds…