Managed Munis: The Value of Choice

Managed Munis: The Value of Choice

Active management is critical for municipal bond investors today.

The muni environment is changing rapidly from a market driven mostly by changes in interest rates to one that also takes into account the creditworthiness of the underlying issuer, regulatory headwinds and other challenges.

In this new world, Western Asset believes that investing in municipal bonds should be approached with the same analytical rigor applied to areas of the bond market more typically described as “spread” sectors — where credit analysis and quantitative tools can add significant value to bond portfolios. Investors can no longer rely solely on rating agencies and bond insurers to guide the way. Instead, investment decisions — especially issue selection — must be governed by fundamental analysis and a thorough understanding of the financial health of individual issuers.

This trend represents a move in the direction of the team’s investment strengths. As an innovator in the municipal marketplace, Western Asset has always brought analytical rigor to the process of selecting municipal securities. Its team approach to managing portfolios and its analytical tool kit, which includes both quantitative and fundamental aspects, have long been the hallmark of Western’s investment process — setting it apart in the world of municipal investing.


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IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

The opinions and views expressed herein are not intended to be relied upon as a prediction or forecast of actual future events or performance, guarantee of future results, recommendations or advice.  Statements made in this material are not intended as buy or sell recommendations of any securities. Forward-looking statements are subject to uncertainties that could cause actual developments and results to differ materially from the expectations expressed. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. Information and opinions expressed by either Legg Mason or its affiliates are current as at the date indicated, are subject to change without notice, and do not  take into account the particular investment objectives, financial situation or needs of individual investors.

Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the promotion or marketing of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

 

Yields and dividends represent past performance and there is no guarantee they will continue to be paid.

A credit rating is a measure of an issuer’s ability to repay interest and principal in a timely manner. The credit ratings provided by Standard and Poor’s, Moody’s Investors Service and/or Fitch Ratings, Ltd. typically range from AAA (highest) to D (lowest). Please see www.standardandpoors.com, www.moodys.com, or www.fitchratings.com for details.

Active management does not ensure gains or protect against market declines.

U.S. Treasuries are direct debt obligations issued and backed by the "full faith and credit" of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasury securities, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities.