Download Intermediate-Term Municipal Bond

separately managed accounts | municipal fixed income
Intermediate-Term Municipal Bond
second quarter 2017
(as of 6/30/2017)
Firm Facts
▪▪ Nuveen Asset Management is a
premier investment boutique with a
product and service mix that spans
from traditional and specialized equity
to municipal and taxable fixed income
▪▪ 192 investment professionals
▪▪ $167.4 billion in assets under
management1
Investment Objective
▪▪ Focus on total return performance while
seeking to provide consistent income
Investment Process
▪▪ The Municipal Security Investment Oversight Group and Investment Teams consider four strategic inputs –
economic outlook, credit analysis, trading and yield curve analysis – when determining overall investment strategy.
▪▪ The Municipal Security Investment Oversight Group provides the Investment Teams with targets and/or guidelines
regarding duration, sectors and credit quality.
▪▪ The Investment Teams utilize the Municipal Securities Investment Oversight Group targets and guidelines in
portfolio construction (which can include the opportunistic use of leverage) and employ their expertise with regard
to yield curve positioning and security structure.
▪▪ Performance is regularly evaluated through attribution analysis.
Strategic Inputs
Client
Portfolio
Objectives
Strategy
Economic
Outlook
Credit
Analysis
Trading
Yield Curve
Analysis
NAM Municipal
Security
Investment
Oversight Groups4
Duration
Sectors
Credit Quality
Yield Curve Security
Positioning Structure
Investment Philosophy
▪▪ Manage risks to aid investment
performance consistency
▪▪ Design client portfolios that seek to
provide current income that enhances
an entire portfolio
▪▪ Use a value-oriented approach to
rigorously evaluate securities and sectors,
select attractive bond structures and
position the portfolio within appropriate
maturity and duration ranges
Attribution
Analysis
Intermediate-Term (Gross)
▪▪ Option to omit bonds subject to AMT
▪▪ Tax-aware investing3
▪▪ State portfolios available in select states
Intermediate-Term (Net)
B loomberg Barclays 3-15 Year Blend
(2-17) Municipal Bond Index
5%
0%
-5%
QTD
2.06%
1.74
1.81
1 Yr
-0.81%
-2.05
-0.23
3 Yrs
3.08%
1.80
2.91
5 Yrs
2.88%
1.61
2.90
7 Yrs
3.88%
2.59
3.81
10 Yrs
4.41%
3.12
4.55
Calendar Year Performance7,8
▪▪ Focus on tax-aware investing3
Customization
NAM Investment
Team5
6,7, 8,9
▪▪ Active management
▪▪ High-quality bonds (BBB- or better)2
Implementation
Annualized Performance
Investment Highlights
▪▪ Intermediate-term duration
Performance
Intermediate-Term (Gross)
Intermediate-Term (Net)
3.56%
-0.12
3.46
7.13
-1.99
5.07
10.85
2.91
8.26
1.49
4.22
2.92%
-1.36
2.17
5.80
-3.20
3.77
9.49
1.63
6.93
0.23
2.95
2017 YTD9
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
1 Assets under management (AUM) as of 6/30/17. 2 At time of purchase, bonds must be rated
investment grade. 3 Nuveen is not a tax advisor. 4 The Municipal Security Oversight Group
includes portfolio managers and other members of the municipal team. 5 The Investment Team
is composed of portfolio managers and trading assistants. 6 Periods greater than one year are
annualized. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Bloomberg Barclays
3-15 Year Blend
3.49%
-0.05
3.06
6.96
-1.24
5.15
9.63
3.14
9.46
2.27
4.46
7 The inception date is 4/1/95. The results explanation on the second page of this profile
is an integral part of the performance presentation. Past performance is no guarantee of
future results. 8 The benchmark is the Bloomberg Barclays 3-15 Year Blend (2-17) Municipal
Bond Index. Benchmark returns are sourced through RIMES. 9 Preliminary. Final numbers are
available upon request by contacting Nuveen Investments Advisers, LLC.
1
second quarter 2017
(as of 6/30/2017)
Intermediate-Term Municipal Bond
Portfolio Characteristics
▪▪ Average Maturity Target ▪▪ Average Duration Target ▪▪ Average Quality Target ▪▪ Average Annual Turnover ▪▪ Typical Number of Holdings Sector Weightings
7–10 years
5–6.5 years
AA+10
15%–40%
8–15
11,12
■ Education13
■ Electric13
■ Hospital13
■ Housing13
■ IDR/PCR13,14
Credit Quality
9.2%
3.3%
9.3%
1.0%
0.0%
■ Leasing13
9.5%
■ Local GO
28.3%
■ Other15
0.8%
■ Prerefunded
3.9%
■ Resource Recovery13 0.2%
■ Special Tax13
11.6%
■ State GO
6.8%
■ Transportation13 6.6%
■ Water & Sewer13 9.5%
11
■ AAA
■ AA
■A
26.3%
61.9%
11.2%
■ BBB
0.2%
■ Other/Non-Rated 0.5%
10 Nuveen Asset Management, LLC (“NAM”) employs the
following criteria when referring to managed accounts’
municipal bond average credit quality (“ACQ”): ratings are
from nationally recognized statistical rating organizations
(“NRSRO”). Split-rated securities receive the highest rating.
ACQ is calculated by NAM, using statistical tools and the
most current ratings available from third-party sources on
all securities, but no guarantees are made with respect to
their accuracy or completeness. A portfolio may include
substantial holdin gs of individual securities that are rated
materially higher or lower than the average. ACQ does not
necessarily reflect the credit risk of individual holdings and
its potential impact on an overall portfolio. For example, ACQ
may understate the credit risk from a substantial holding in
a lower-rated security. There are limitations associated with
the use of ACQ as a gauge of portfolio credit risk. Securities
not rated by a NRSRO are identified as non-rated, and are
not included in the ACQ calculation. Inherited securities
may be unrated and reside in the portfolio over the shortterm. Unrated securities are not purchased by NAM for
managed accounts. A portfolio’s individual holdings, the
ratings of these holdings, and the ACQ of a portfolio may
change over time. For certain strategies and/or programs,
additional restrictions may apply. 11 Source: Nuveen
Asset Management. Data tabulated using Perform SMA by
Investortools, Inc. customized for Nuveen Investments. Based
on the Bloomberg Barclays Municipal Bond Index categories.
The portfolio characteristics represent all accounts that are: at
least 45 days old as of the end of the previous quarter; have
a market value of at least $100,000; and have an allocation
to cash less than or equal to 5%. All data is preliminary and
subject to change. 12 Based on the four main sectors of the
Bloomberg Barclays Municipal Bond Index (State and Local
Government Obligation Bonds, Revenue Bonds, Insured
Bonds and Prerefunded Bonds). The Bloomberg Barclays
classification system includes bonds in the insured sector
only if obligations of the insurer are rated Aa3/AA- or higher.
For the NAM portfolio sector weightings above, any insured
bonds are included within various sector categories. 13 Subset of the Revenue Bond Sector. 14 Industrial
development revenue bonds and pollution control revenue
bonds. 15 Includes municipal bonds that have not yet been
classified or do not conform to the classification of the main
quality ratings or sectors. Cash is not included.
This material is not intended to be a recommendation or
investment advice, does not constitute a solicitation to buy or
sell securities, and is not provided in a fiduciary capacity. The
information provided does not take into account the specific
objectives or circumstances of any particular investor, or suggest
any specific course of action. Investment decisions should be
made based on an investor’s objectives and circumstances and
in consultation with his or her advisors.
This strategy is only provided through separately managed
accounts program sponsors. Check with your financial advisor for
availability. Clients should consult their financial advisors before
making any investment decisions. Financial advisors should
consider the suitability of the manager, strategy and program for
its clients on an initial and ongoing basis.
do include the deduction of fees and certain other expenses in
the form of comprehensive wrap-fees. Net of fee performance
was calculated using the highest applicable annual fee of
1.25%, applied monthly. For additional information regarding
fees specific to a broker-dealer program, contact your referring
financial advisor.
Individual returns may vary based on factors such as the account
type, market value, cash flows and fees.
The Composite is benchmarked against the unmanaged
Bloomberg Barclays 3-15 Year Blend (2-17) Municipal Bond
Index, which is produced by Bloomberg L.P. to measure the
returns of general obligation bonds, revenue bonds, insured
bonds and pre-refunded bonds, all in the maturity range of 2
to 17 years. To be included in the index, bonds must be rated
investment-grade (Baa3/BBB- or higher) by one or more of the
following rating agencies: Moody’s, S&P, or Fitch (using the lower
of two, or the middle of three ratings). Bonds must also meet
requirements for par amount outstanding, and must be at least
one year from their maturity date. The weighting of each security
is based on its relative market value. Benchmark returns are
sourced through RIMES.
This benchmark was changed in the first quarter of 2011 from
the Bloomberg Barclays 7-Year Municipal Bond Index. This
retroactive change was made after determining that the maturity
range encompassed in the Bloomberg Barclays 3-15 Year Blend
(2-17) Municipal Bond Index was a better representation of
the Intermediate-Term strategy. Benchmark data was obtained
from third party sources deemed reliable but not guaranteed
for accuracy or completeness. NAM’s municipal fixed income
accounts may significantly differ from a benchmark in number
of holdings and because they include selected securities whose
inclusion and weightings are based on discretion. All indices are
unmanaged and unavailable for direct investment. Index returns
include reinvestment of income and do not reflect investment
advisory and other fees that would reduce performance in an
actual client account.
NAM is an affiliate and the successor to the portfolio
management business of Nuveen Asset Management effective
1/1/11.
Past performance is no guarantee of future results. All
investments carry a certain degree of risk; it is important to
review investment objectives, risk tolerance, liquidity needs, tax
consequences and any other considerations before choosing an
investment style or manager. An investment in any municipal
portfolio should be made with an understanding of the risks
involved in investing in municipal bonds such as interest rate
risk, credit risk and market risk, including the possible loss of
principal. The value of the portfolio will fluctuate based on the
value of the underlying securities. Concentration in a small
number of holdings may increase risk exposure. A $250,000
account in this strategy typically holds 8-15 individual bonds
under normal circumstances. The number of bonds may vary
and may be greater or fewer based on factors such as account
size, client transactions and market conditions. Accordingly, one
or more individual bonds may each represent greater than 10%
of the account. A decline in value of any one or more individual
bonds may have a material impact on the account value. Please
contact your tax advisor regarding the suitability of tax-exempt
investments in your portfolio. If sold prior to maturity, municipal
securities are subject to gain/losses based on the level of interest
rates, market conditions and the credit quality of the issuer.
Income may be subject to the alternative minimum tax (AMT)
and/or state and local taxes, based on your state of residence.
Income from municipal bonds held by a portfolio could be
declared taxable because of unfavorable changes in tax laws,
adverse interpretations by the Internal Revenue Service or state
tax authorities, or noncompliant conduct of a bond issuer. Clients
should consult their financial advisors regarding unknown
financial terms and concepts.
Nuveen Investments Advisers, LLC (“NIA”), a registered
investment adviser, provides Separately Managed Accounts
marketing services for its affiliates that are registered investment
advisers, including NAM. Both NIA and NAM are affiliates of
Nuveen, LLC. This report is provided by NIA.
PERFORMANCE NOTES
Nuveen Asset Management, LLC (“NAM”) offers its services either
directly to clients (fee-based “direct-advisory” accounts, fee-based
“institutional” accounts and “commission-based” accounts) or
through broker-dealer programs as an advisor or sub-advisor
(fee-based “advisor-sponsored” accounts). NAM is presenting a
Composite of Intermediate-Term Advisor-Sponsored Accounts
(the “Composite”). The inception date is 4/1/95. For each
quarter NAM has prepared the Composite by calculating
the asset-weighted average return of all fee-based advisorsponsored accounts that had been managed on a discretionary
basis according to NAM’s intermediate-term investment-grade
municipal fixed income strategy; NAM currently defines
‘intermediate-term’ as an average portfolio maturity of generally
7 to 10 years and ‘investment-grade’ as securities rated Baa3 or
higher by Moody’s and/or BBB- or higher by Standard & Poor’s
(however, the Composite may include certain accounts that are
restricted to securities rated ‘uppermedium investment-grade’,
A3 or higher by Moody’s and/or A- or higher by Standard &
Poor’s). Accounts with significant cash flows (currently defined
by NAM as an external flow [either in cash and/or securities]
greater than 50% of an account’s beginning market value for the
quarter) are removed from the composite for the entire quarter
in which the cash flow occurred; such accounts, as well as new
accounts, are given a grace period for investment (currently
four to six weeks) before they are reviewed for inclusion in a
composite. Although there is no minimum account size for
inclusion in the Composite, NAM does not normally accept
accounts less than $100,000 ($250,000 for state-specific). For
fee-based advisor-sponsored accounts, returns on a gross-of- fees
basis do not include the deduction of trading commissions,
other transaction costs or fees; returns on a net-of-fees basis
COMPOSITE STATISTICS
2017 YTD16
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
# of Accounts
18,017
17,467
15,175
14,311
13,896
14,438
13,941
13,942
13,215
12,066
12,235
Assets ($M)
$13,404.2
12,623.3
11,490.4
10,805.2
10,256.4
11,624.9
11,208.5
10,829.9
10,495.6
9,277.0
9,108.0
16 Preliminary. Final numbers are available upon request by
contacting Nuveen Investments Advisers, LLC.
Nuveen Investments Advisers, LLC | 333 West Wacker Drive | Chicago, IL 60606 | 800.752.8700 | nuveen.com
2
AFS-NITCAPAS-0617P 227532-INV-Q-10/17
Totals may not equal
100% due to rounding.