Taxable Fixed Income

Municipal Opportunities

An Inefficient Market Requires a Nimble Approach

Strategy Description

Why invest in the Segall Bryant & Hamill Municipal Opportunities Fund?

The Segall Bryant & Hamill Municipal Opportunities Fund (WTTAX, WITAX) is an actively managed national municipal strategy designed to access the market’s full breadth and take advantage of its structural weaknesses and inefficiencies. It seeks to maximize after-tax total return while providing stability and capital preservation.

An Opportunistic and Flexible Approach

  • Ability to take meaningful positions in smaller credits that are less efficiently traded
  • Seeks to capitalize on large valuation swings in tax-exempt market
  • Seeks to invest in taxable bonds when risk/return profile is advantageous on a tax-adjusted basis
  • Ability to take advantage of short-term trading opportunities when available
  • Available in shares – retail (WTTAX) and institutional class (WITAX)

 

While municipal bonds provide valuable after-tax yield, market limitations require a deft touch. Learn more about the “Muni Concerns” below that the SBH approach is designed to mitigate. 

Muni Concern: Structural Weakness

Municipal indices, and the vehicles that track them, have myriad structural deficiencies.

Index Construction & Weighting
Index fund construction is based solely on size of debt issuance, with no weighting based on credit or pricing.

  • For example, if an issuer is running a large deficit and funds it with debt, it will become a larger part of the index.
  • The high tax states of California and New York, which currently make up approximately 49% of the Bloomberg Municipal Index,1 can have meaningfully lower yields but offer no additional tax advantage to investors who live in other states.


Size Matters

The Bloomberg Municipal Index only includes issuers with an issuance size of over $75M.This means the majority of issuers, and potentially some of the most interesting investment opportunities, are left out of the index and are too small to be meaningful to large funds.

 

 

 

Muni Concern: Large Number of Issuers and CUSIPs3

  • Compared to corporate bonds, muni bonds have approximately 20x more CUSIPs outstanding. There are over 70,000 individual issuers and ~1M CUSIPs.
  • Only 290 of the 15,346, or 2%, of deals were over $300M (considered index-eligible in taxable space) if they were one CUSIP.

 

 

Muni Concern: Fund Assets are Heavily Concentrated4

  • Top 10 funds in the municipal national intermediate space make up 70% of all assets.
  • Two of the largest tax-exempt funds make up 41% of all assets.
  • A 1% position in one of the largest municipal national intermediate bond funds would be $879M.

 

 

 

 

To learn more about investing in the Municipal Opportunities Fund, please reach us at (800) 836-4265 or [email protected].

 

1 Source: Bloomberg. As of 9/30/2021. Top 5 states of the Bloomberg U.S. 1-15 Year Municipal Bond Index: California, New York, Texas, Illinois, New Jersey.

2Source: Bloomberg. As of 9/30/2021.

3Source: CUSIPs data is as of 9/30/2021 from Bloomberg.

4Source: Fund asset data is as of 9/30/2021 from Morningstar. 

Past performance is no guarantee of future results.

Investing in the fund involves risk, including loss of principal. | The Segall Bryant & Hamill Municipal Opportunities Fund invests primarily in instruments issued by or on behalf of different states. A portion of income may be subject to the alternative minimum tax. | Investments in municipal bonds are subject to interest rate risk, or the risk that the bonds will decline in value because of changes in market interest rates.

CUSIP stands for Committee on Uniform Securities Identification Procedures. A CUSIP number identifies most financial instruments, including: stocks of all registered U.S. and Canadian companies, commercial paper, and U.S. government and municipal bonds.

The Bloomberg Municipal Bond, U.S. Credit, Treasury and U.S. High-Yield Indices are unmanaged indices that are considered representative of the broad market for each respective category. An investment cannot be made directly in an index. Standard deviation is a statistical measure of the historical volatility of an investment.

“Bloomberg®” and Bloomberg U.S. 1-15 Year Municipal Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by SBH. Bloomberg is not affiliated with SBH, and Bloomberg does not approve, endorse, review, or recommend SBH Municipal Opportunities Fund. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to SBH Municipal Opportunities Fund.

This material must be accompanied or preceded by a prospectus, which contains this and other important information about the Fund(s). To obtain additional prospectuses, please call 800.734.9378 or visit us online at www.sbhfunds.com. Please read the prospectus carefully before investing.

The Segall Bryant & Hamill Municipal Opportunities Fund is distributed by Ultimus Fund Distributors, LLC.

Investment Vehicles

Mutual Fund

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