Municipal Bonds: Mutual Fund
If you’ve got the stomach for a little more risk and don’t mind the crowds running toward the exits, Oppenheimer Rochester Intermediate Term Municipal Fund (ORRWX) offers a lot of exposure to Puerto Rico might be a place to hide some mad money. Three of ORRWX’s top 10 holdings are in Puerto Rican bonds.
Puerto Rico’s debt in particular tumbled last year as the economy continued to slog through an intractable recession. It didn’t help that bond rating agencies Moody’s and S&P lowered Puerto Rico’s debt rating to junk levels. Nonetheless, despite current turmoil in the territory, Oppenheimer Rochester is not jumping ship — the firm is encouraged by high yields and Puerto Rico’s willingness to prioritize the bonds over other obligations.
And more promising, against that backdrop of chaos, Puerto Rican debt is starting to get up off the mat.
This bond fund offers a 3% yield, and despite its Puerto Rican holdings, the fund isn’t completely wild — 77% of its holdings are rated “A” and above. Also, bondholders are exempt from federal, state or local taxes regardless of where they live in the U.S.
Even so, fixed-income investors at or nearing retirement should tread carefully with this fund because Puerto Rico is not likely to emerge from its challenges anytime soon.
ORRWX, which is actively managed by Oppenheimer’s Senior Portfolio Managers Michael Camarella and Charlie Pulire, charges 1% in expenses and a front-end sales load of 2.25% for A shares. Minimum initial investment is $1,000.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.