In response to recent developments surrounding the coronavirus (COVID-19), MacKay Municipal Managers (MMM) is sharing some points for your review:

- Reflecting on our 2020 Top Five Insights published in January, MacKay Municipal Managers’ thesis remains unchanged.

- In 2019, on the heels of record industry inflows, declining rates, and tighter spreads, the team opportunistically sold weaker structures across our platform amidst high demand, increased credit quality amidst tighter spreads, and we continue to maintain ample liquidity.

- As similar technicals continued in January, 2020, magnified by the recent “risk-off” trade, our defensive posture (while remaining active) is intact and we believe we are well-positioned.

- Active management remains paramount. In a landscape of historically tight spreads and lower yields, incremental alpha delivered through deep credit and spread analysis can distinguish managers relative to passive approaches.

We believe security selection and bond structure drive performance.

- We believe liquidity management is always a critical aspect of the municipal investment process, particularly in this recent cycle. Our market is comprised of ~70% individual investors where emotion and behavioral finance coupled with the lack of liquidity can lead to opportunities to navigate while buying the dips.

- In terms of credit surveillance, MMM is monitoring all sectors of the market, as always, with a close eye on those that may have greater impact related to coronavirus – For example, transportation, ports, hotels generating excise taxes, etc.

Further on credit and consistent with our insights, strategic underweight exposure is likely to drive outperformance in the high yield municipal market. Quality high yield investments will be key as cracks appear.

MMM will continue to actively monitor developments.