Municipals

Philosophy

MacKay Shields Municipal Bond Team is a fundamental value manager, who applies both top-down analysis and bottom-up credit research in the construction of their portfolios. Our investment philosophy is centered on the belief that strong long-term performance can be achieved with a relative value, research-driven approach. Dynamic financial markets require an equally dynamic investment process. Portfolios are actively managed in an effort to capitalize on market inefficiencies, consistently build a yield advantage, and seek an attractive after-tax total return. To help reduce volatility, we employ a risk management focus throughout the investment process. We believe that disciplined research into identifying mispriced securities creates a winning formula for our clients.

Discipline

Individual securities are reviewed, first from a credit perspective, and then from a spread, or relative value, perspective.  The Team’s internal credit review includes examining documentation such as the offering statement, financial reports, and/or capital program plans.  We analyze the cash flows, determine the individual security features of the bonds and/or review the demand features of the project.  In addition, by understanding the political purpose behind a project, we are able to gain additional insight into the support for the securities should the bonds come under economic pressure.  A key factor is analyzing the structure of the bond including the security’s coupon, maturity, and original issue discount and whether the bond is for new money or refunding prior bonds.

Since the municipal market is not static, our process is dynamic.  Every day, each bond has to earn its place in our portfolios.  Valuations are reviewed by the Team to determine sell targets, whether they are based upon dollar price or spread.