Nuveen High Yield Municipal Bond Fund

Overview

When seeking yield, investors frequently gravitate toward below-investment-grade bonds. These are bonds that ratings agencies consider more likely than others to go into default.

Municipalities, as well as corporate issuers, get into financial trouble and risk default. Because the bonds are at a higher than average default risk, investors demand to be paid more for holding them.

The Nuveen High Yield Municipal Bond Fund gives investors access to this particular segment of the market.

As of November 27, 2023, the fund has assets totaling almost $14.72 billion invested in 3,291 different holdings. Its portfolio consists primarily of non-investment-grade and unrated municipal bonds.

The fund strives to maintain a weighted average maturity in excess of 10 years. The current weighted average maturity within the fund is 22.13 years.

The fund, which is benchmarked to the Standard & Poor’s Municipal Yield Index, holds 2,214 positions. As is often the case with bond funds, it’s more concentrated than its benchmark, which tracks 10,555 bonds. That concentration occurs partly due to the difficulty of managing more than 10,000 distinct holdings, especially given the selling that necessarily occurs as issues reach their maturity dates.

High-yield bonds are riskier than investment-grade bonds. For that reason, high-yield bonds often have stock-like characteristics, meaning they don’t necessarily correlate to other bond indexes at all times.

The fund has returned -0.80 percent over the past year and -2.84 percent over the past three years.

Many investors in high tax brackets seek municipal bonds because these securities are exempt from regular federal income taxes. This fund offers the dual benefits of favorable tax treatment and high bond yields.

In recent years, as U.S. equity markets performed well after 2009, this fund outpaced the Barclays U.S. Aggregate Bond Index, which tracks the U.S. investment-grade bond market.

However, that comparison is only to illustrate the fund’s differentiation from investment-grade funds. To truly gauge performance, a comparison with other high-yield securities is more apt. Morningstar tracks the fund within its High Yield Muni category. Fund performance outshined the category average in recent years.

The fund launched in 1999. Since inception, its total return, including a maximum sales charge, was 5.03 percent through Dec. 31, 2015.

The fund has returned 0.22 percent over the past five years and 3.66 percent over the past decade.