By Catherine Stienstra, Head of Municipal Investments
Traditional muni indices are concentrated in higher quality bonds and may have more interest-rate risk.
Passive products that track traditional municipal bond benchmarks may give investors excessive exposure to duration (interest-rate) risk, because of the way traditional indices are constructed.
Problem: Traditional indices have a quality bias
Municipal bonds have long been viewed as high-quality assets, partly because the majority of them historically carried a AAA rating. Until 2008, monoline insurance was prevalent, enhanced the credit rating of a bond and provided additional protection to investors in the