Municipal Bond Forum
Mismanaged accounts
Q
I agree with your philosophy as far as bond management. What is your opinion on advisors who recommend active bond management as a separately managed account to capture gains and losses. They say they get better institutional pricing, which more then makes up for the yearly fee, which is a percentage of assets.
A
James A. Klotz responds:
Our opinion has not changed. Actively managing a municipal bond portfolio usually only benefits the manager.
Quality municipal bonds move in tandem as a function of interest rates. Since all bonds move together, buys and sells occur in the same market when a profit is taken on one bond a higher price will be paid for its replacement.
Talk about “institutional” pricing is nonsense. Ask whoever says they will provide bonds at better prices to put this guarantee in writing. These claims will stop.
Start here.
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