BondView preps ratings for muni bond funds

BondView LLC, an operator of a free site for muni bond investors, is planning to launch municipal bond fund ratings by March. The ratings will enable investors and advisers to visit the firm’s website and see the fund ratings, as well as the ratings of the individual bond holdings, for free — a first in the industry.
While Morningstar Inc. rates municipal bond funds, BondView’s ratings will rate each bond holding and will allow investors and advisers to see those ratings. Bonds will be rated according to five criteria: credit risk, duration, diversification, yield and sector, said Robert Kane, founder of BondView.
“This will essentially be an X-ray of municipal bond funds and can complement what Morningstar does,” Mr. Kane said.
Given the mass redemptions municipal bond funds have suffered over recent weeks and the overall fear about defaults in the municipal bond market, a ratings service that delves into the actual holdings could be very helpful to investors and advisers, said Paul Jacobs, a certified financial planner with Palisades Hudson Financial Group LLC, which manages more than $1 billion in assets.
“Many of these funds hold hundreds of bonds, so a service like this could really save advisers a lot of time,” Mr. Jacobs said. “The more data, the better.”
Municipal bond funds saw a record in net outflows of $5.7 billion during the one-week period ended Jan. 19, according to the Investment Company Institute. That was the biggest weekly outflow the ICI has seen since it started tracking weekly fund flows in 2007.
Last May, the Securities and Exchange Commission launched an investigation of the municipal bond market, designed to increase transparency. The agency has brought a case against New Jersey for allegedly failing to disclose its pension obligations to investors. The SEC is also looking into similar issues in Illinois and Harrisburg, Pennsylvania.
Initially, the BondView’s ratings will be available for both open- and closed-end municipal bond funds, but the firm hopes to add ratings for corporate-bond funds over time, Mr. Kane said. The ratings will be updated daily.