The 2 things in life that are inevitable

Slides:



Advertisements
Similar presentations
Copyright ©2004 Pearson Education, Inc. All rights reserved. Chapter 16 Investing in Bonds.
Advertisements

Characteristics of Taxable Securities Money Market Investments Highly liquid instruments which mature within one year that are issued by governments and.
It’s Your Money! Week 7: Fixed Income Investing. What is Fixed Income? A loan to company or government  payback with interest – Terms of the investment.
Financial Markets Chapter 12.
Investments: Analysis and Behavior Chapter 15- Bond Valuation ©2008 McGraw-Hill/Irwin.
Business in Action 7e Bovée/Thill. Financial Markets and Investment Strategies Chapter 19.
September 18, Portfolio Strategy In a Rising Interest Rate Environment.
19-1 Financial Markets and Investment Strategies Chapter 19.
Business in Action 6e Bovée/Thill Financial Markets and Investment Strategies Chapter 19.
Econ ch ________ money makes economic growth possible. 2. One person’s savings can represent another person’s ______.
HIDDEN DESCRIPTION SLIDE — NOT TO BE SHOWN TO THE PUBLIC Basics of Mutual Fund Investing Catalogue code: B18 Full presentation or module? Presentation.
Financial Markets. Saving and Capital Formation Saving money makes economic growth possible One’s person savings can represent another person’s loan Savings.
Investment Savings Account A safer way to grow your clients’ cash Name, DESIGNATION Title, Company Name Date.
Presenter Name Title MFS Investment Management ® Keep more of what you earn Tax-efficient MFS municipal bond funds © 2009 MFS Investment Management.
Role of Financial Markets and Institutions
Financial Intermediaries Institutions that channel savings to investors; such as banks, insurance co.’s and credit unions.
ALTERNATIVE Calamos Market Neutral Income and Convertible Funds versus Strategic Income Funds Selection based on funds with Strategic Income/Risk.
Securities Analyst Program
Chapter 15 Investing in Bonds 15-1
Presented by StanCorp Equities, Inc., member FINRA
Financial Markets.
Financial Markets Financial Assets-claim on the property or income of the borrower Financial Intermediary-institution that helps channel funds from savers.
Unit 5: Saving & Investing
Mutual Funds: An Easy Way to Diversify Professor Payne, Finance 4100
Managing Money 4.
Chapter Fourteen Bond Prices and Yields
Personal Finance SIXTH EDITION Chapter 16 Investing in Bonds.
Presented by StanCorp Equities, Inc., member FINRA
Bond fundamentals Chapter 17.
4 Mutual Funds and Other Investment Companies Bodie, Kane, and Marcus
Financial Assets and Their Markets
Investing Opportunities
Personal Finance Mutual Funds
Financial Institutions and Markets FIN 304
MFIN 403 Financial Markets and Institutions
Municipal Bonds BA 561 – Supply Chain Management April 30, 2012
Financial Institutions and Markets FIN 304
Chapter 11 Financial Markets.
Chapter 3 Jones, Investments: Analysis and Management
Investing: Taking Risks With Your Savings
Dryden Strategic Value
Chapter 4: Deposits in Banks
CHAPTER 7 BOND MARKETS All Rights Reserved Dr David P Echevarria.
BONDS Savings and Investing.
Mutual Fund Management of Bond Funds
In investing, it’s not how much you make,
Basics of Mutual Fund Investing
Bond Valuation Copyright ©2004 Pearson Education, Inc. All rights reserved.
Investing in Mutual Funds
Investing in Bonds.
Bond Valuation Chapter 6.
Investing in Bonds.
Investing in Bonds.
Jennison Conservative Growth Fund
Chapter 11 Financial Markets.
Investing in Bonds.
Topic 4: Bond Prices and Yields Larry Schrenk, Instructor
Investing in Bonds.
Investing in Bonds.
MYPF Bonds are ? that must be repaid at maturity.
Chapter 6 The Risk Structure and Term Structure of Interest Rates
Bonds, Economic Bonds..
Presentation on UTI Fixed Term Income Fund Series X - I (252 days)
Managing Money 4.
Current Allocations**
Chapter 11 Financial Markets.
Thursday, March 23, 2017 Objective: Students will be able to assess ways to be a wise investor when purchasing bonds. Purpose: Knowing how to make smart.
Annualized Since Inception Cumulative Since Inception
SHORT DURATION HIGH YIELD MUNICIPAL BOND FUND
Financial Markets Update
Presentation transcript:

The Case For Municipal Bonds: JennisonDryden Municipal Bond Funds Name Date

The 2 things in life that are inevitable Taxes We’ve all heard the old adage “The only things in life that are certain are death and taxes”. Death

Which one do clients fear most? Death or taxes…which do we fear the most.

But there are ways to avoid that tax bill But there are plenty of ways to avoid paying taxes…….however some of the more creative ways may come with a cost. Just ask Leona Helmsley, Marc Rich or Al Capone. We won’t go into these strategies here.

Municipal Bonds may be the answer Generally free from federal taxes Results in attractive after-tax yields May also be free from state taxes Results in more attractive after-tax yields

A quality fixed income investment Average cumulative 10-year default rates from 1970 to 2000 were .04% for all grades of municipals. 9.83% for all grades of corporate bonds Investment Grade Municipals cumulative default rate 10 years after issuance averages 0.03%. 0.675% for AAA rated corporate bonds Out of 28,000 municipal issuers rated from 1970 to 2000, only 18 have defaulted. 819 defaults by around 7,000 rated corporate bond issuers. Source: Moody’s Investor Services – Municipal Default Study 11/2002

Munis - An efficient asset class Sharpe Ratios by Fixed Income asset class Source: Lehman Brothers. Data as of 3/31/2005. Sharpe ratio is a ratio to measure risk-adjusted performance. The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance.

Favorable after-tax comparison to treasuries Muni Tax Equivalent Yields Munis are not just for the rich any more. They can benefit investors in the lower tax brackets as well. As of 3/31/2005 Shaded areas indicate where after-tax yields for Munis exceed yield for Treasuries. Source: Bloomberg

Favorable after-tax comparison to corporates Muni Tax Equivalent Yields Munis are not just for the rich any more. They can benefit investors in the lower tax brackets as well. As of 3/31/2005 Shaded areas indicate where after-tax yields for Munis exceed yield for A rated corporate bonds. Source: Bloomberg

Many experts agree “A growing economy and shrinking state deficits make municipal bond prices attractive” – Bill Gross, Money, May 2005 “In investing, it’s not what you pay that counts, it’s what you get to keep. That’s why tax-free investing is so appealing.” - Jeff Schnepper MSNBC “I think even in the smaller tax brackets, munis can make a lot of sense……if you look at returns over the last five years, municipal bonds have been one of the best-performing assets available." - Hugh McGuirk, head of the municipal bond department at T. Rowe Price 3/24/2005 Jeff Schnepper is the author of the best-selling, "How to Pay Zero Taxes," which is in its 15th edition. He has written several other books on finance and taxation including "TurboTax Deluxe," "How Much is it Worth? Asset and Business Valuation," "The New Bankruptcy Law: A Professional Handbook," and "Inside the IRS, How it Works (You Over)." A former professor of taxation, accounting and finance, Schnepper has argued before the U.S. Supreme Court and has appeared on numerous national and local television programs. He lives in New Jersey.

Why should your clients buy a municipal bond fund versus a single municipal bond? Professional Management seeks to maximize total return, not just yield continuous evaluation of portfolio structure and quality Diversification risk can be reduced by holding securities across various sectors and maturities, and by limiting individual positions Market Access and Execution large market participants have superior market access and offer size-driven trading advantages not available to retail investors Liquidity investor has immediate access to funds Individual bonds can be called. Bond funds can not 1.      Before I get to the funds, let me touch on an issue that I know does come up whenever we talk about bond funds. It’s the issue of why funds over direct purchases of bonds. I’ll admit that if what your client wants is a certain coupon stream and a defined maturity on principal, then you would need to buy an individual bond. But if you are putting money into bonds as part of an asset allocation program, then you should buy a professionally managed fund or separate account. Professional management means managing for the best risk-adjusted return as opposed to simply buying bonds and putting them away. In addition you get better liquidity with a fund. You get better access to bonds – there’s a hidden cost of buying individual bonds: the bid/ask spread on odd-lots can be 2-3 times the amount on institutional lots. You also get monthly payment of dividends and most importantly diversification.

What Factors Drive Performance in Fixed Income? Lots of things! Different types of bonds are affected by different factors Bonds have enough complex characteristics to warrant professional management Performance Drivers Convexity Covenants Liquidity Geopolitics Duration Sector Allocation Optionality Prepayment Risk Coupon Selection Credit Research Interest Rates

JennisonDryden Mutual Funds Who is JennisonDryden? JennisonDryden Mutual Funds Bringing Institutional Asset Management Capabilities to Retail Investors JennisonDryden is Prudential Financial’s mutual fund and managed accounts family. We offer a broad spectrum of investments—from core portfolio building blocks to strong sector funds. The managers of our funds are known and respected by major corporations and pension funds throughout the world. When you invest with us, you benefit from the same process, research, risk management, and competitive performance demanded by some of today’s largest investors

Prudential Fixed Income Significant Market Presence $152 Billion* One of the Largest Fixed Income Managers in US** Have managed portfolios for institutional clients since 1928 Managing proprietary fixed income portfolios since 1875 Broad Coverage of Fixed Income Markets Significant market presence and expertise in broad range of sectors Within each sector, in-depth, focused, expertise Assets Under Management By Sector * Assets as of 3/31/05. Excludes additional assets in total public fixed income managed by certain other units or affiliates of Prudential Investment Management. Holdings are subject to change. Asset class breakdown based on company estimates. ** Source: Institutional Investor, July 2004, based on domestic fixed income securities held as of 12/31/03.

Prudential Fixed Income A Major Institutional Asset Manager Representative Client List* Aluminum Company of America Arkansas Public Employees Retirement System AT&T Brick Masons’ Trust Funds BVP – Pensionskassen Aktiengesellschaft Chuo Mitsui Pension Plan ConocoPhillips Corporation Doyon, Limited Erste – Sparinvest/KAG FedEx Corporation Florida State Board of Administration FMC Corporation Fresno (City of) Retirement Systems Metal Trades Branch Local #638 NEC Corporation New York City Employees’ Retirement System New York City Fire Department Pension Fund New York City Police Department Pension Fund Pressroom Unions’ Pension Trust Fund Prudential Financial Pension Plan Prudential Insurance Company of America General Account Rio Tinto America, Inc. Samsung Life Investment (America) Ltd. Teamsters Local #301 The Boeing Company Tredje AP-fonden (AP3) UFCW Local #1500 U.S. Allianz Investors Service * Clients listed above are those who allow their names to be publicly disclosed. Disclosure does not indicate approval or disapproval of PIM’s advisory services. As of 12/31/04.

Dryden Municipal High Income Fund A Well-Diversified Municipal Bond Fund Higher Quality / Interest Rate Sensitive AAA 24% AA 6% BBB 19% A 10% Ratings Breakdown (as of 3/31/05) Non-Rated 28% Lower Quality / Credit Sensitive Assets $634.3 million Duration 6.32 years Average Quality A 30 Day SEC Yield (A) 4.49% Taxable Equivalent Yield* 6.90% < BBB 13% Source: Prudential Investment Management, Inc. *Taxable Equivalent Yield is based on a Federal tax rate of 35%. The Fund may invest in high yield or “junk bonds,” which have greater credit and market risks. This risk may result in greater share price volatility. Holdings are subject to change.

Dryden Muni High Income Fund - Performance Performance 1 3 5 10 (as of 3/31/05) Year Year Year Year Dryden Muni High Income (A) 5.4% 6.2% 5.5% 5.5% Lipper High Yield Muni Category Avg 5.3% 6.3% 5.8% 5.3% Lipper Percentile Rankings 45 48 52 38 Standardized Performance 1 3 5 10 (as of 3/31/05) Year Year Year Year SEC Standardized Returns (w/sales charges) 1.1% 4.8% 4.6% 5.0% Inception Date: 1/22/1990 Past performance does not guarantee future results and current performance may be lower or higher than the past performance data quoted. The investment return and principal value will fluctuate and shares when sold may be worth more or less than the original cost. For the most recent month-end performance go to www.jennisondryden.com. Maximum sales charge is 4.5%. Source: Lipper, Prudential Investments. Ranking represents the fund’s standing across all funds in the High Yield Muni category, 1%=highest; 100=lowest. The fund’s class A shares ranked 36, 35, 32 and 12 out of 79, 72, 61 and 31 funds over the 1-, 3-, 5- and 10-year time periods, respectively.

Dryden National Municipals Fund A High Quality Municipal Bond Fund Ratings Breakdown (as of 3/31/05) Assets $536.0 million Duration 6.41 years Average Quality AA 30 Day SEC Yield (A) 3.14% Taxable Equivalent Yield* 4.83% Source: Prudential Investment Management, Inc.. *Taxable Equivalent Yield is based on a Federal tax rate of 35%. Holdings are subject to change.

Dryden National Muni - Performance Performance 1 3 5 10 (as of 3/31/05) Year Year Year Year Dryden National Muni (A) 2.2% 5.5% 6.1% 5.6% Lipper General Muni Debt Category Avg 2.0% 5.3% 5.7% 5.3% Lipper Percentile Rankings 43 39 28 29 Standardized Performance 1 3 5 10 (as of 3/31/05) Year Year Year Year SEC Standardized Returns (w/sales charges) -1.9% 4.1% 5.3% 5.2% Inception Date: 1/22/1990 Past performance does not guarantee future results and current performance may be lower or higher than the past performance data quoted. The investment return and principal value will fluctuate and shares when sold may be worth more or less than the original cost. For the most recent month-end performance go to www.jennisondryden.com. Maximum sales charge is 4.5%. Source: Lipper, Prudential Investments. Ranking represents the fund’s standing across all funds in the General Muni Debt category, 1%=highest; 100=lowest. The fund’s class A shares ranked 121, 102, 64 and 41 out of 284, 261, 228 and 144 funds over the 1-, 3-, 5- and 10-year time periods, respectively.

Disclosures Dryden Municipal High Income Fund may invest in high yield or “junk bonds,” which have greater credit and market risks. This risk may result in greater share price volatility. Prudential Fixed Income is a unit of Prudential Investment Management, Inc. (PIM). Jennison Associates LLC, Quantitative Management Associates LLC, and PIM are registered investment advisors and are Prudential Financial companies. For more information about JennisonDryden mutual funds, see the prospectus. Clients should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. The prospectus will contain this and other information about the investment company. Clients should read the prospectus carefully before investing. Shares of mutual funds are distributed by Prudential Investment Management Services LLC (PIMS), PIMS is a Prudential Financial company. JennisonDryden is a registered service mark of The Prudential Insurance Company of America. IFS-A104240 Ed: 05/2005