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Ed Meek
CEO/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, playing and following basketball, playing golf, and participating as an advisory board member for Breakthrough Urban Ministries.

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PIMCO Moves to Offer Two New Municipal Bond Funds

PIMCO has filed two new municipal bond offerings with the SEC as investors pour money back into the once-troubled sector.

| BY Adriana Reyneri


PIMCO last week filed two new municipal bond offerings with the U.S. Securities and Exchange Commission (SEC) as investors continue to pour money into the sector they fled after dire, but unfulfilled predictions of widespread municipal bond defaults.

Municipal bond funds have seen 15 straight weeks of positive inflows, including $698 million for the week ending March 14, according to Morningstar, Inc., which tracks the mutual fund industry. Federally tax-exempt income, regular payments and relative security appear to be winning back investors who sold in panic after celebrity analyst Meredith Whitney predicted billions of dollars of defaults in 2011.

PIMCO appears poised to meet this renewed interest with a new California Municipal Bond Fund and a National Intermediate Municipal Bond Fund. Registration statements for the funds were filed March 7, according to SEC records. The registration process typically takes about 75 days.

Overall investment in municipal debt is approximately $2.8 trillion today, according to the SEC, compared to $361 billion in 1981 and $20 billion in 1945. The products are favored by high net worth investors seeking tax-advantaged income. More than 70 percent of individuals with investable assets of $15 million to $25 million own municipal bonds, according to a fourth quarter study by Millionaire Corner on financial product ownership. Their average balance of their municipal bond holdings is $624,000.

Municipal bonds are “unique” among fixed-income financial products, according to Investment Basics provided by PIMCO. The debt obligations are issued by U.S. state and local governments and, unlike other bonds, offer tax-exempt income. Individuals rather than institutions make up the largest investor base. As a result munis tend to have higher credit quality and lower volatility than other fixed-income sectors, and lower volatility relative to other bonds of comparable maturity, PIMCO said.

The products also contain risks, warns the SEC, including call risk, the risk an issuer will repay a bond before its maturity date, and  interest rate risk. A hike in interest rates can reduce the face value of a bond or the income on a floating-rate product. Inflation poses a risk by reducing the purchasing power of a fixed-income product and can also drive up interest rates. Municipal bonds may be also be difficult to sell, posing “liquidity risk” for investors.

The SEC also warns investors to consider all tax implications of municipal bond income, which may be subject to the federal alternative minimum tax or be eligible for state income tax benefits. The agency also notes the most bond brokers are compensated through a markup over the cost of a bond to the firm, but the markup is usually not disclosed. Any commissions charged will be reported on the confirmation statement.

Bond brokers must be properly licensed and registered with a securities regulator such as the SEC, a state regulatory agency, FINRA or the MSRB.

The two main types of municipal bonds are general obligation bonds and revenue bonds. General obligation bonds are secured by the full faith and credit of the issuer, while revenue bonds are secured by charges tied to the use of facilities, such as toll roads, bridges and water treatment plants, said PIMCO.