We believe there is a strong investment case for many classes of high yield municipals, and for select portfolios, these bonds can offer attractive risk adjusted returns vs. other fixed income asset classes:
- Average yield advantage over investment grade municipals of 250 basis points historically;
- Relatively low default rates compared to corporate bonds;
- Many high yield municipals enjoy a security structure that includes a collateral pledge on real property and/or equipment; and
- Historically less correlated returns to U.S. equities.