American Century�s Gotelli on Risk, Tax Loss Harvesting

American Century’s Gotelli on Risk, Tax Loss Harvesting

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TAXF

The muni bond picture continues to offer major opportunities for investors, with muni yields becoming more attractive. Absolute and tax-equivalent yields have reached multi-decade highs, drawing retail and other investors into the market. Meanwhile, the future holds some meaningful opportunities via tax loss harvesting. American Century Investments Vice President and Senior Portfolio Manager Joe Gotelli recently joined VettaFi to discuss.Key Takeaways: Muni bonds continue to offer real appeal with record volume on some days in recent weeks. The category’s combination of elevated yields and tax-free income can help mitigate rising costs. Rate risk, rather than credit risk, looms. Muni bond ETFs like TAXF can help. Gotelli, who joined the firm in 2008, spoke to the significant “backup” in munis last month that now have appealing yield valuations. The category has seen crossover investors move into the municipal market, as well as new retail attention, he said. “We’ve seen some record volume days in the asset class,” Gotelli explained. “Institutional accounts like ourselves, as well as retail, [are] extracting value in the market by executing tax loss harvesting trades." “Really our goal in the last couple of weeks has been to ensure that we’re improving the income distribution on all of our portfolios across the board in this more attractive yield environment,” he added. Elevated yields mean investors can discriminate a bit more when considering credit opportunities. The yields enable investing at attractive yields without needing to reach for credit risk. That said, there are downside risks. It’s more of a rate-driven market situation than a credit risk situation, he said, with discretion needed in some areas. “I think for the market, [it’s] just a clear understanding that, even though we’ve had some headlines around certain credit events in our market, the negative total returns that we’re experiencing have been predominantly rate driven at this point,” he said. See more: American Century’s Gotelli: What to Know on Munis Amid Yield Highs As for next steps for portfolios, where the firm had previously emphasized the rich belly of the curve, more opportunities have sprouted up in other areas. That also empowers managers to use more complex structures, he said, to “add positive convexity” to the portfolio. The firm offers a variety of muni bonds ETFs, including the American Century Diversified Municipal Bond ETF (TAXF ). As more and more investors look to tax loss harvest, muni bonds provide some real opportunities for yield in a durable market environment. For more news, information, and analysis, visit the Core Strategies Content Hub.

American Century’s Gotelli on Risk, Tax Loss Harvesting

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