Fee Based MuniBond Portfolio Management

[Earl E Retyre]

Do any of the people on FIRE who invest heavily in munibonds pay a portfolio manager fee to manage your munibond portfolio for you? Is it worth paying a .5% fee?

 

[MichaelB]

Do any of the people on FIRE who invest heavily in munibonds pay a portfolio manager fee to manage your munibond portfolio for you? Is it worth paying a .5% fee?

What is there to manage? Is this buying and selling or buying and holding? It is difficult to buy muni bonds in small quantities without paying very high markups. Much better to pay the 0.5% to muni mutual fund managers IMHO and let them do the work.

 

[Earl E Retyre]

This is buying and mostly holding. Supposedly the manager would (a) help select the bonds and (b) continually/actively track the quality of the bonds so if the municipality investment degraded then they would sell for you if they thought it made sense. If going with a muni fund manager, as you point out, you are still paying the .5% fee but then you do not have the guaranteed fixed income and principle return if held to maturity. That is my understanding anyway.

 

[brewer12345]

This is buying and mostly holding. Supposedly the manager would (a) help select the bonds and (b) continually/actively track the quality of the bonds so if the municipality investment degraded then they would sell for you if they thought it made sense. If going with a muni fund manager, as you point out, you are still paying the .5% fee but then you do not have the guaranteed fixed income and principle return if held to maturity. That is my understanding anyway.

If you wish to hold to maturity, you can do so with a fund. There are scads of muni closed end funds with target liquidation dates, which means they are essentially holding bonds to maturity. Find one you like offered by a brand name muni manager (I think highly of Nuveen) and skip the individual manager. Either taht or just buy the bonds yourself and skip the managers.

 

[kaneohe]

You may want to doublecheck that 0.5% figure. I was invited to a Schwab "educational" seminar a few yrs ago. It was held in a fancy club designed to impress. I was a bit disappointed that it turned out to be more of a marketing presentation to sell their management services and even more disillusioned when they cut off the Q&A just after it started when the questions started to become detailed and probing.

Supposedly they do something similar to what you seem to be saying......provide enhanced yield by "astute" trading.. Someone asked the cost of doing business. The answer was 0.6%, similar to yours. The problem for me what that they had presented this one slide, supposedly showing the enhanced results (I assume of their best results). The average cost of all the managed assets was in fact 0.6% but the cost for the specific assets showed on the slide was significantly more.
......so they were comparing apples and oranges........... no outright lies but a sneaky attempt to present truth and truth but not the whole truth.

Kind of turned me off so I don't even accept calls from that guy anymore. I think I prefer holding individual bonds to maturity for the (hopefully) return of principal or mutual funds for diversity/liquidity.

 

[brewer12345]

You may want to doublecheck that 0.5% figure. I was invited to a Schwab "educational" seminar a few yrs ago.

I have yet to be invited by Schwab. I think I have sufficient net worth to be in their target market, so either its my age or they see the letters after my name and blacklist me accordingly.

 

[MichaelB]

Someone with the skill to deliver above average return but working retail portfolios for 0.5% sounds a bit "too good to be true". The muni market for investors is very granular, so there are open and closed end fund options to satisfy just about every investing objective.

 

[kaneohe]

If you wish to hold to maturity, you can do so with a fund. There are scads of muni closed end funds with target liquidation dates, which means they are essentially holding bonds to maturity. Find one you like offered by a brand name muni manager (I think highly of Nuveen) and skip the individual manager. Either taht or just buy the bonds yourself and skip the managers.

brewer......thanks for refreshing my memory. After the disillusioning Schwab talk, I called their fixed income dept to see if they had something similar to this......I think in the olden days they called them UITs? I got the impression they don't since they didn't try to twist my arm but I squeezed some suggestions like Nuveen and a few others I don't recall out of them.

I made an attempt to investigate online but didn't get very far for some reason and didn't feel like calling them at that point in time, then kind of forgot, I guess. May have to try again. If you have any links to specific suggestions, I'm all ears..........

 

[brewer12345]

I do not have specific fund recommendations, but you could peruse the websites of Nuveen, Eaton Vance and Blackrock. It also appears that there are a whole series of ETFs that do this: A Guide to Maturity-Date Bond ETFs - Seeking Alpha

 

[kaneohe]

brewer, thanks, appreciate the info and link.

 

[MooreBonds]

There's also
CEFConnect - Brought to you by Nuveen Closed-End Funds

for a great summary of a variety of ETFs. It's sponsored by Nuveen, but lists nearly all ETFs....summary of portfolios, distributions, graphs of premium/discount, etc.