OppenheimerFunds among the biggest bulls on Puerto Rico's municipal bonds

Of the muni bond funds tracked by Morningstar Inc., OppenheimerFunds stands out as the biggest fan of debt issued by financially-strapped island nation

May 3, 2016 @ 9:52 am

By Jeff Benjamin

Puerto Rico's missed debt payment on Monday is seen by some on Wall Street as just the latest shoe to drop for the financially-strapped island nation.

The country has another $2 billion debt payment due July 1, is $70 billion in debt, and is prevented by U.S. law from seeking protection through Chapter 9 bankruptcy that is available to most U.S. municipalities.

The default on a nearly $400 million debt payment is expected to ripple across the municipal bond markets, and could create some awkward moments for financial advisers that are allocating clients to seemingly plain-vanilla muni bond funds.

In essence, because of Puerto Rico's triple-exemption status, which means the income on its bonds are exempt from taxes at the federal, state and local levels, some municipal bond shops have been loading up on the country's higher-yielding debt.

Of the muni bond funds tracked by Morningstar Inc., OppenheimerFunds stands out as the biggest fan of Puerto Rican bonds.

Muni funds with outsized exposure to Puerto Rico
Fund Ticker Category Puerto Rican exposure Total fund assets
Franklin Double Tax-Free Income A FPRTX High Yield Muni 44.72% $143.57M
Oppenheimer Rochester® MD Municipal A ORMDX Muni Single State Long 42.6% 48.65M
Oppenheimer Rochester® VA Municipal A ORVAX Muni Single State Long 39.29% 95.15M
Oppenheimer Rochester® Fund Municipals A RMUNX Muni New York Long 20.1% 5.6B
Oppenheimer Rochester® Ltd Term Muni A OPITX High Yield Muni 19.32% 2.0B
Oppenheimer Rochester® AZ Municipal A ORAZX Muni Single State Long 19.11% 43.69M
Oppenheimer Rochester® NJ Municipal A ONJAX Muni New Jersey 17.7% 396M
Oppenheimer Rochester® Michigan Muni A ORMIX Muni Single State Long 17.29% 43.08M
Oppenheimer Rochester® LtdTerm NY MunisA LTNYX Muni Single State Short 16.76% 2.7B
Oppenheimer Rochester® AMT-Free NY MuniA OPNYX Muni New York Long 16.29% 1.1B

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