NIM: Quality Tax-Advantaged Yield To Get Excited About

2025-03-14 07:18:01 ET

Summary

• Most tax-advantaged and tax-exempt funds are not appealing to us due to low yields or high leverage.
• Nuveen Select Maturity Municipal Fund focuses on tax-exempt income and capital preservation, investing at least 80% in municipal securities exempt from federal tax.
• The fund's lack of leverage is rare in municipal CEFs, making it suitable for our conservative investment community.

We've written on several tax-advantaged and tax-exempt funds previously. In general, most of them have been a pass for one of two reasons. The yield was either not worth it, or the leverage was too high. Sure, some of the latter group did perform very well, assuming you bought them when rates were falling. But for us, taking leverage on this low yielding asset class is not enticing. Munis yield very low nominal amounts and borrowing to take leverage is done at regular rates. This creates a minimal "spread" on the leverage and only really boosts income if short-term interest rates are extremely low. So why do funds do this? Well, the aim is to enhance NAV gains when rates fall....

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