Past visit with portfolio manager

Muni Manager

Twice now I’ve had the opportunity of meeting with the chief portfolio manager of the Franklin CA Tax-free fund, Christopher Sperry, CFA®, who joined Franklin Templeton in 1996.

Here are some points that Chris made:

  • Muni Bond Market is $3.7 Trillion in size
  • Interest rate is 4.3% * TAX-FREE—equivalent to about a 6% taxable
  • Supply of Muni bonds is down and the demand is up.
  • Investors tend to like the steadiness of the Muni bonds
  • Net asset value has been relatively flat for a long time—nick- named Dead Man’s pulse

Chris pointed out a very interesting reason why volatility tends to be low in the municipal bond market. Because of the double tax free advantage, California residents are typically the only ones investing in these funds. With US Treasuries, however, the whole world invests and global influences can cause a greater amount of volatility.

If you’re wondering about the strength of California and the ability of the different cities to keep their obligation to pay bond holders, Chris is not concerned. He said that even Vallejo in bankruptcy never missed a payment.

Investment Recommendations:

The Franklin Group feels that investors waiting on the sidelines may miss out on current income opportunities. We agree and are using these funds in portfolios when appropriate. If you’d like to explore getting more tax-free income, be sure to let me know.

Distribution Rate at NAV4
As of 3/31/12. 4.37%

Thank you so much,

ML's Signature