FICC Focus
Technological Advancement in Muni SMAs: Masters of the Muniverse
May 28, 2024
Nisha Patel, a seasoned portfolio manager at Parametric specializing in tax-advantaged bond strategies, joins the hosts for an engaging discussion. They explore the municipal bond market's current landscape, emphasizing the impact of rising yields and political uncertainties due to the upcoming elections. Nisha sheds light on how technology is reshaping investment strategies, enhancing efficiency in managing separately managed accounts (SMAs). The conversation also touches on navigating tax implications and optimizing after-tax returns in a fluctuating market.
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Quick takeaways
- The municipal bond market faces challenges due to increased supply and outflows, suggesting cautious optimism for recovery if macroeconomic conditions improve.
- Technological advancements in separately managed accounts are transforming investment practices, enabling customized strategies and enhanced efficiency for managing municipal bonds.
Deep dives
State of the Municipal Bond Market
The performance of municipal bonds has been surprisingly weak lately, primarily due to a significant increase in market supply, which is up nearly 40% year-over-year. This influx of new supply has led to a decline in the Bloomberg Munis index, which is currently down approximately 1.5% as investors grapple with outflows and market volatility. The retail-dominated aspect of the munis market has contributed to this struggle, making it a pivotal moment for investors. Looking ahead, there is a potential for recovery in the latter half of the year if the macroeconomic landscape remains supportive, particularly as the summer months often bring reinvestment flows.
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