Credit matters. That’s the crux of the newly released book, “Investing in the High-Yield Municipal Market,” written by Triet Nguyen, a 30-year veteran of the fixed-income market who used his years of experience in research and trading within the complex segment of the industry as a springboard for the 254-page publication.
In it, he offers up the history, risks and default records of high-yield municipal bonds as well as case studies. He describes common and special types of high-yield municipal securities and discusses defaults, bankruptcies and high-yield investing in the post-bond insurance era.
The book’s subtitle is “How to Profit from the Current Municipal Credit Crisis and Earn Attractive Tax-Exempt Interest Income.”
Nguyen researched and wrote the book last year, roughly over a nine month-period, and worked to include as much up-to-date information into the final draft before the official release on July 10. He noted that 2011 ended up being a “tremendous rebound year for the muni market,” culminating in a full recovery after the selloff triggered in late 2010 by analyst Meredith Whitney’s prediction that the muni market would experience an onslaught of defaults.
“Yet, even throughout the latest recovery [in 2011], signs of credit stress were increasing, particularly at the local government/agency level. I started out treating the high-yield market as a separate and unique sector of the tax-exempt market, but, by the time I was done, I felt that the distinction between 'high-grade’ and 'high-yield’ was starting to blur.”
To supplement the book and to keep up with the constantly evolving market, Nguyen has created a new blog site, www.highyieldmunicipals.com, as a way to stimulate ongoing dialogue and update the book’s contents that may already seem outdated. He said he wrote the book to offer readers a glimpse of the past as well as a fresh new perspective of the $28 billion distressed sector about which little had been published.
“I was fortunate enough to have witnessed the birth of the institutional high-yield muni market back in the early 1980s, so I thought readers might enjoy getting that firsthand historical perspective,” Nguyen explained. In addition, “with the recent de-commoditization of the market, post-2008, I felt the need to re-energize the market discourse on credit strategies and current challenges/opportunities in the marketplace.”
He is currently a managing partner at Axios Advisors LLC, where he also served as president. Nguyen was previously a senior vice president at B.C. Ziegler in charge of tax-exempt high-yield and taxable municipal bond trading, and managing director of Saybrook Capital LCC, a vice president and portfolio manager at John Hancock Funds, and senior portfolio manager at Putnam Funds.
Besides his own views, the book also includes significant contributions from a cross-section of market and finance pros.
Nguyen said the book has been well-received although he expects some readers may take issue with his viewpoint of “managing for yield” versus “managing for total return” outlined in Chapter 3, entitled “The Investment Case for High-Yield Municipals.” In it he also addresses comparisons between the speculative market and other asset classes.
He said his target audience includes high net-worth investors, money managers, crossover investors from the taxable side, and experienced high-yield investors. “In this Dodd-Frank era, anyone involved in trading or selling high-yield securities to retail investors should view this book as a good reference source,” he said.
“I hope interested investors will come away with a better feel for the risk-return potential of this asset class,” he added. “You cannot be a successful muni investor unless you know how to manage your credit exposure profitably,” he added.
Nguyen said he may consider writing about a particular segment of the high-yield market, such as the tobacco or health care sectors, in a future publication.
The book, published by John Wiley & Sons, is part of the Bloomberg Press financial series.