MacKay Shields | Municipals Team

Municipal bonds managed by MacKay’s Municipal Managers are suitable for income-oriented investors seeking to achieve attractive after-tax total returns for tax-sensitive accounts and attractive total returns for tax-exempt accounts. Portfolios are managed by a team of portfolio managers and analysts with an average of more than 20 years of investment experience. The team’s tenure, skill, and proficiency allows its members to focus on exploiting market inefficiencies in order to build a yield advantage and seek to achieve attractive after-tax total returns through fundamental, in-depth credit research. Our proven experience in municipal securities markets includes investing in investment grade, high yield and taxable municipals, as well as tender option bonds, municipal inflation-protected bonds, floating rate notes, and variable-rate demand obligations. Our longstanding relationships and access to a deep network of influential market participants helps us identify attractive opportunities in municipal bond markets.

We are a fundamental relative-value bond manager that applies both a top-down overlay and bottom-up credit research in the construction of U.S. tax-exempt and taxable municipal portfolios. Our investment philosophy centers on our belief that strong long-term performance may be achieved with a relative value, research-driven approach:

Portfolios are actively managed in an effort to capitalize on market inefficiencies, consistently build a yield advantage, and seek to achieve attractive after-tax total returns for tax-sensitive accounts and attractive total returns for tax-exempt accounts.
Risk controls are embedded throughout the entire investment process to help reduce volatility.
Disciplined bottom-up credit research by our veteran investment professionals helps to identify mispriced securities.

We seek to capitalize on opportunities in municipal markets created by the mispricing of securities or misunderstood information by using a consistent investment process that combines a bottom-up, fundamental research-driven approach with a top-down perspective. We begin by outlining our macro view about the economy, interest rates, inflation and geo-political concerns such as pending legislation that may impact taxes and sectors of the municipal market. This view guides our decisions relating to portfolio weightings for sectors, yield curve positioning and duration. As part of our fundamental, bottom-up process, we then review individual securities first from a credit perspective and then from a spread, or relative value, perspective. This review includes examining documentation such as the offering statement, financial reports, and/or capital program plans. We also analyze cash flows, determine the individual security features of the bonds and review the demand features of the project. When our research is complete, we then review spreads and assign weights to likely outcomes over the next 24 months. Those bonds that we believe have the best relative value are purchased for our portfolios. Because the municipal market is dynamic, not static, we continue to review our valuations regularly to determine sell targets.

Municipal High Yield

Objective

Municipal High Yield seeks to generate attractive after tax returns by investing primarily in lower investment grade and non-investment grade municipal securities.

Investment Universe

Our Municipal High Yield portfolios may invest in the entire municipal bond universe, including, but not limited to, U.S. Tax-Exempt and/or Taxable investment grade and non-investment grade Municipal Bonds, exchange traded funds, common or preferred shares of closed-end funds and municipal CDS. Portfolios focus on BBB and below rated instruments.

Municipal Investment Grade

Objective

Municipal Investment Grade seeks to generate attractive after-tax returns by investing primarily in investment grade municipal securities.

Investment Universe

Our Municipal Investment Grade portfolios may invest in the entire municipal bond universe, including, but not limited to, U.S. Tax-Exempt and/or Taxable investment grade Municipal Bonds, exchange traded funds, common or preferred shares of closed-end funds and municipal CDS. Portfolios focus on BBB and above rated instruments.

Municipal Short Term

Objective

Municipal Short Term seeks to generate attractive after tax returns by investing primarily in tax-exempt and taxable municipal securities with a maximum portfolio duration of three years.

Investment Universe

Our Municipal Short Term portfolios typically invest in the same sectors represented by the Barclays Municipal Bond 3 Year (2-4) Index, including, but not limited to tax-exempt and taxable municipal securities. Portfolios focus on BBB and above rated instruments.

Municipal Taxable

Objective

Municipal Taxable seeks to uncover compelling opportunities with a focus on investment grade securities which offer potential for attractive income and enhanced total return relative to investment grade corporates and other fixed income sectors.

Investment Universe

Our Municipal Taxable portfolios principally invest in high quality taxable municipal bonds. Portfolios are both buy and hold and actively traded, high credit quality with a bias toward longer duration. Some portfolios may allocate between taxable and tax-exempt municipal bonds based on relative value considerations.

John M. Loffredo, CFA

Co-Head of Municipal Managers
Portfolio Manager

Robert A. Dimella, CFA

Co-Head of Municipal Managers
Portfolio Manager

Portfolio Management & Trading

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Credit Research & Risk Analytics

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Municipal Managers

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