Forced selling of munis seen as unlikely

Mutual funds might be forced to sell off lower-quality issues that carry a high rating due to insurance.
NOV 16, 2007
By  Bloomberg
A possible downgrade of municipal bond insurers has caused worries that mutual funds might be forced to sell off lower-quality issues that carry a high rating due to insurance. Some tax-free funds are required to hold certain amounts of higher-rated bonds. But observers said forced selling is unlikely. “Some money [from mutual funds] for sure would come out” in the event of a downgrade, said Matt Fabian, a Westport, Conn.-based senior analyst with Municipal Market Advisors. “But not all, because [funds] have different ways of interpreting [guidelines for] what they can hold.” Mutual fund “prospectus language is broadly enough conceived to prevent exactly that type of situation,” said Lawrence Jones, a mutual fund analyst at Morningstar Inc. in Chicago. Mr. Jones said some funds also can temporarily depart from their normal investment policy “in the event of extreme market stress.” This month, Fitch Investors and Moody's Investors Service said they were reviewing the bond insurers due to their exposure to CDOs. For the full report, see the upcoming Nov. 19 issue of InvestmentNews.

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.