The US municipal market is complex and generally lacks the transparency of the equity markets. We believe information flows can be asymmetric and favor institutional players over retail participants. We believe one needs to be a municipal market professional with deep domain experience and access to high quality information to be successful in the long term.
Investment Strategies and Services
16th Amendment Advisors is Exclusively Focused on Municipal Bonds.
Our goal is to be your outsourced municipal bond trading desk. We view ourselves in partnership with financial advisors and clients. Our “White Glove” approach to municipal bond management distinguishes us from what we believe to be a commoditized municipal SMA market. We think municipal investors should expect more.
Municipal Relative Value
Municipal Relative Value (“MRV”) is a discretionary portfolio with a GIPS compliant 10+year track record. It is designed for high after-tax current income and modest capital appreciation through proactive trading and portfolio positioning. The portfolio will be proactively managed to account for the ever-changing nature of the municipal market. All or 100% of its holdings will be rated A- or better at time of purchase. This trading strategy is more macro positioning-based (i.e. certain coupon structures, duration, states, or parts of the yield curve may be rich or cheap). It has an average maturity limitation of 19 years.
Internally, we consider Municipal Relative Value to be more analogous to a total return product than one that relies solely on interest income.
Municipal Enhanced Performance
Municipal Enhanced Performance (“MEP”) is a discretionary portfolio with a GIPS compliant 10+year track record. The strategy is managed similar to Municipal Relative Value (high component of tax-exempt income with capital appreciation) except it uses margin leverage on a periodic or episodic basis designed to add incremental alpha to the portfolio’s returns. The margin leverage should be considered opportunistic and/or thematic.
At the discretion of the investment manager, up to 0.40 times of the equity may use margin leverage. Thus, for an account with a value of $ 1 million, at maximum margin exposure, the amount of margin borrowing is $400,000 for a total asset value of $1.4 million. The timing and amount of the thematic and opportunistic trading will be unpredictable throughout the course of a year. As a general matter, the investment manager may utilize the margin capacity in an effort to take advantage of market dislocations, arbitrage trading, legislative events and/or seasonal factors as a means to add alpha to the portfolio’s return.
Internally, we look at this strategy as a way to earn a “sleeve” of trading alpha on top of a significantly invested municipal portfolio generating tax-exempt income. We also would expect that, over time, it will be less market directional than a classic buy-and-hold strategy due to its alpha component.