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Investius Interview: Muni CEFs: Featuring John Cole Scott of CEF Advisors

by on November 17, 2014

JCS-Investius-Muni-2014-01117After last year’s difficulties, closed-end funds with municipal bonds now appear relatively attractive for discount-seeking investors, says John Cole Scott of CEF Advisors.

What a difference a year makes. After last year’s difficulties, analyst John Cole Scott of CEF Advisors believes the muni sector of closed-end funds now appears relatively attractive for discount-seeking investors.

John Cole Scott, CEF Advisors:
Muni bonds in the closed-end fund world is a big, a third, of the chunk of funds out there. And if you look at it right now they’re trading at about an 8 discount… This is from our closed-end fund data dated October 17th. And if you look at a longer term, 10-year average discount for muni bond funds, being this wide is more than a 2 standard deviation event, so yes, definitely on the cheap side. We know they got hurt in 2013, but on a one-year basis their net asset values are up about 19% year to date total return and market prices are up about 16% on a one-year total return basis.

As some investors may have noticed, muni funds have come a long way since last year’s decline.

Munis had a horrible 2013. They started the year off, they peaked at a 3 premium, they bottomed out, I think, at a 13-14 discount in the middle of the fourth quarter. And so, if you think about the sector, we were very cautious about them in first quarter of 2013, because we like the structure, we like the guts, we like tax-free bonds, but we felt that as a whole there… very hard to find value in that area, versus now it’s very easy to find value.

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