ATLANTA, July 19, 2011 /PRNewswire/ -- RidgeWorth Investments announced today that it has published a white paper highlighting that, despite the negative headlines; the fundamental outlook for municipal bonds remains a qualified positive. "The headlines that predicted the demise of the municipal market may have been a bit too dire," says Ron Schwartz, CFA, portfolio manager for the RidgeWorth Investment Grade Tax-Exempt Bond Fund.
The white paper, entitled "Municipal Bond Investing: Have The Headlines Painted An Accurate Picture?", provides a general background of the municipal market, as well as an analysis of six key topics related to the municipal market, which include:
- State and Local Budgets are an Annual Issue – unlike the federal government, most state and local governments require a balanced budget and will manage them through spending adjustments or, in some cases, tax increases.
- Municipal Default Rate Remains Lower than Corporate – despite calls for major defaults in the news, historically investment grade municipal debt has had a low default rate compared to investment grade corporate debt.
- Municipal Bond Fund Flows Mask Actual Ownership – although outflows from municipal bond funds have been significant over the past year, household ownership of municipal bonds has not declined.
- Shrinking Supply Could be a Positive Sign – the supply of new municipal bonds has fallen dramatically, but the expiration of the Build America Bonds program will return supply to the tax-exempt market.
- Market Transitioning from Rate- to Credit-Driven – the credit quality of governmental-purpose municipal bonds remains generally strong and astute credit analysis can help identify high-quality issuers from stable states and local governments.
- Tax Benefit of Municipals Should Only Improve – whatever the direction of tax brackets, it is expected that tax-exempt bonds will continue to have attractive total rate of return on a tax-equivalent basis, with less volatility (as measured by annualized deviation of returns).
For higher tax-bracket investors, tax-exempt securities should remain a core holding, whether held though mutual funds focused on investment-grade bonds, or through a separately managed portfolio.
This paper is the latest in a series that RidgeWorth has developed to educate advisors and investors about style classes that it believes are generally overlooked.
Download this and other RidgeWorth White Papers at http://ridgeworth.com/advisor-resources/recent-research
About RidgeWorth Investments
RidgeWorth serves as a money management holding company with six style-specific institutional investment management boutiques, each with a well-defined, proven approach and all with unwavering commitments to exceptional performance. Through our multiple, style-specific boutiques, we offer a wide range of equity and fixed income investment disciplines. RidgeWorth Investments, an investment adviser registered with the SEC since 1985, is headquartered in Atlanta, Georgia.
All investments involve risk. This information is educational in nature, provided as general guidance on the subject covered, and is not intended to be authoritative or to provide legal, tax, estate planning or investment advice.
Bond investors should anticipate fluctuations in price, especially for longer-term issues and in environments of rising interest rates. Indexes are unmanaged and investors cannot invest directly in an index. The yields illustrated do not represent any RidgeWorth Fund. A tax-exempt municipal bond's income may be subject to certain state and local taxes and, depending on an investor's tax status, the federal alternative minimum tax. RidgeWorth does not provide tax advice. Please consult your tax advisor for your particular situation.
Rating agencies such as Moody's, rates securities from Aaa (highest quality) to C (lowest quality) with Baa and above being called investment grade securities. Ba and below are considered below investment grade (speculative) securities.
This paper reflects the analysis and opinions of RidgeWorth Investments as of June 2011. Because market and economic conditions are often subject to rapid change, the analysis and opinions provided may change without notice. The analysis and opinions may not be relied upon as investment advice.
Statements of fact are from sources considered reliable but no representation or warranty is made as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy. In preparing this paper, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from reliable sources.
Past performance does not guarantee future results. An investor should consider the fund's investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information about the RidgeWorth Funds can be found in the fund's prospectus. To obtain a prospectus, please call 1.888.784.3863 or visit www.ridgeworth.com. Please read the prospectus carefully before investing.
©2011 RidgeWorth Investments. RidgeWorth Investments is the trade name for RidgeWorth Capital Management, Inc., an investment advisor registered with the SEC and the adviser to the RidgeWorth Funds. RidgeWorth Funds are distributed by RidgeWorth Distributors LLC, which is not affiliated with the adviser.
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