Disclaimer: Dan owns TYW, MNP and OIA in his Covestor TaxAdv Income Model.
October 6, 2010: The below text is licensed to Covestor Ltd. (“Covestor”), by Dan Plettner. Such text may be disseminated only by Covestor. Dan Plettner invests and receives income for securities research, including “buy-side” research. Dan licenses his own real time trading data to Covestor Ltd. (“Covestor”). Covestor is a Registered Investment Advisor that uses Dan Plettner’s data to create the Core, Long Short Opportunistic, Tax Advantaged Income, Taxable Income, and MLP Direct Ownership models for its clients. Dan’s words should not be misconstrued as investment advice.
On a personal note, I enjoyed the Covestor webinar. Since leaving Wall Street, I’ve loved the personal autonomy. Regarding Western Asset Municipal Partners Fund (MNP), I discussed the valuation, distributions, undistributed net investment income, and my perception as to the shareholder base’s relevance to governance decisions. More broadly, my speech on Closed-End Funds was never so liberated, even when communicating with Financial Advisors. I will continue to make myself available to Covestor for any follow up questions.
I continue to believe the market for Closed-End Municipal Income Funds is extremely inefficient. I’m certainly happy with what I observe in the daily fluctuations, income, prospects for monthly dividend hikes, and attractive valuations in the funds I hold.
According to Covestor’s performance report, the top performer was TS&W Claymore Tax Advantaged Balanced Fund (TYW). TYW has been the subject of a recent Activism Campaign. What I believe made it the model’s top performer in September also subjects this holding to the most market risk. TYW is not a pure play in Municipal Bonds. Among More broadly, the Municipal Bond asset class was not rewarded as the investing world embraced risk assets in September. Invesco Municipal Income Opportunities Trust (OIA) was the worst performer with a -2.33% return. The portfolio return was-0.34%.
The possibility of changes to, or expiration of the Bush Tax Cuts may be similarly relevant to Municipal Bonds (my focus here) and Master Limited Partnerships given that these instruments often avoid traditional dividend taxes. Accordingly, I find it interesting to compare my performance here with my account licensed to the MLP focused model. Contrasting such tax-interested strategies in September, performance was better in MLPs, likely related to the positive beta. Of course, there are risks in every asset class.
In September, according to Covestor’s risk report, the Beta here was -0.04. I continue to believe in blending my styles together. As I keep saying, I use a blended approach of alternate styles in my overall strategy. Each of my accounts has a unique style, this being one. I believe in blending alternate style biases within my own discipline in effort to achieve more smoothness over the long term. I continue to lack a crystal ball.
