Intermediate Value

Uncover hidden gems in the municipal marketplace.

If you would like a next-level intermediate portfolio, consider the Intermediate Value strategy offered here at Gurtin Municipal Bond Management. Thanks to our credit and quantitative research that we apply in managing this strategy, we believe we are able to identify both misunderstood credits and structural mispricing in the municipal market, allowing our team to target attractive bonds that others may have overlooked. With this municipal investment strategy, your objective is to achieve a level of tax-exempt income which exceeds that of a standard intermediate portfolio.

Keep reading to learn more about which types of investors benefit from this strategy as well as the unique features of the Intermediate Value strategy. In addition, discover key strategy statistics and historical performance information. You will also be able to download strategy fact sheets and explore answers to commonly asked questions.

Investor Profile

Suitable for Clients Focused on Capturing Relative Value

Such as those with longer investment horizons who are planning to hold bonds to maturity, with no foreseen liquidity needs

Intermediate Value Features

When Average Simply Isn’t Good Enough

If you seek to outperform a traditional intermediate-term laddered portfolio, but don’t want to sacrifice credit quality to achieve it, Gurtin’s Intermediate Value strategy might be perfect for you.

Affectionately referred to as our “Ladder-Plus” strategy in house, the Intermediate Value strategy involves the use of a unique portfolio structure comprised of 50% callable and 50% bullet (i.e., non-callable) bonds. This creative structure allows our team to maintain a consistent duration profile while leveraging our expertise in the callable bond space. In particular, our credit- and quantitative-research teams uncover value that managers who stick to a simple laddered approach often overlook.

By taking a more holistic approach to municipal credit research, the Gurtin team is able to identify municipal bond opportunities that others in the market may miss due to a misunderstanding of the credit risk factors at play. In contrast to other managers, we build our own independent credit analysis from the ground up, with no reliance on the public credit ratings agencies, for a more comprehensive understanding of credit profiles.

Our quantitative research team then steps in to identify bonds that have been mispriced due to a reliance on archaic pricing conventions or to a misunderstanding of complex bond structures. In combining our comprehensive credit and quantitative analyses, we are often able to identify opportunities that others miss. The result is often a level of tax-exempt income that exceeds that of intermediate-term laddered portfolios.

Intermediate Value Key Statistics

Key Statistics
 
Quality

Ready to Get Started?

If the Intermediate Value strategy objectives and performance data align with your client’s investment objectives, we invite you to take the next step and request a portfolio review, so our Advisory Services team can open a new account for your client as soon as possible:
OR
If the objectives of the Intermediate Value strategy do not match your municipal investment goals, please complete a quick questionnaire, which will allow us to help you find the strategy that is right for you:

Frequently Asked Questions

Have Questions? We Have Answers.


HOW IS THIS STRATEGY DIFFERENT FROM THE MUNICIPAL LADDER – INTERMEDIATE STRATEGY?

The Intermediate Value strategy differs from the Ladder strategy in a few ways. For instance, the Intermediate Value’s main objective is to provide returns in excess of that of a standard intermediate-term portfolio while the Ladder’s objective is to provide a predictable level of income. To accomplish the primary goal, our team uses credit and market research and quantitative analysis offensively to identify misunderstood opportunities in the municipal bond market, whereas our Ladder portfolios invest in more straightforward credits and structures. In addition, portfolios managed under our Intermediate Value strategy are comprised of 50% callable and 50% bullet (i.e., non-callable) bonds, whereas portfolio managed under our Ladder strategy are typically comprised of almost 100% bullet bonds.


WHY DOES THIS STRATEGY HAVE A HIGHER VOLATILITY THAN THE MUNICIPAL LADDER – INTERMEDIATE STRATEGY?

In order to identify bonds that are mispriced due to inherent structural pricing inefficiencies in the market, we may target slightly longer effective duration in the Intermediate Value strategy than we do in the Municipal Ladder – Intermediate strategy. In an upward-sloping yield curve environment, longer duration allows for capturing higher yield, which in turn, generally leads to higher returns, as the investor is rewarded for assuming additional risk.


WHY DOES THIS STRATEGY HAVE A HIGHER YIELD THAN INTERMEDIATE TERM?

There are several reasons this strategy generally has higher yield than the Municipal Ladder – Intermediate strategy does. One of the reasons is that the slightly longer effective duration mentioned above often leads to additional yield, again, due to the added risk assumed with longer duration targets. More significantly, the primary objective of this strategy is to uncover relative value (i.e., returns) in excess of that of a standard intermediate-term portfolio. Because this is meant to be a buy-and-hold strategy, however, Intermediate Value does not offer the same level of  liquidity nor does it offer as low of volatility as the Municipal Ladder – Intermediate strategy does.

For information about strategies for which you can choose your targeted maturity range, please compare strategies.


DO YOU HOLD BONDS TO MATURITY?

We follow a disciplined approach of selling bonds when their maturity falls below one (1) year, because doing so offers key advantages. For instance, 1-year bonds provide increased liquidity and limited volatility. In addition, evidence show consistent outperformance of 1-10 year bond ladders relative to industry-standard 0-10 year bond ladders. Otherwise, barring any credit issues, we generally hold bonds to maturity.


HOW DOES THIS STRATEGY COMPARE TO YOUR OPPORTUNISTIC VALUE STRATEGY?

For both our Intermediate Value and Opportunistic Value strategies, our team purchases what we consider to be “value credits” — essentially, bonds with obligors (i.e., the entities responsible for repaying principal and interest on a bond) that may be lesser known within the municipal bond market but that still have solid credit quality. The primary differences between these two (2) strategies, however, lie in their duration and approach to investment.

With Intermediate Value, duration is somewhat less flexible than it is with Opportunistic Value because portfolios managed under the former strategy are comprised of 50% bullet bonds (i.e., non-callable bonds) laddered from 1-10 years and 50% callable bonds with maturities extending out to 15 years, while still maintaining an overall intermediate term. In contrast, duration is completely flexible for Opportunistic Value because we are willing to target the portions of the yield curve where value is found, which changes over time.

Portfolios managed under our Intermediate Value strategy are fully invested following a new account’s initial investment period, which is typically within a couple of months. Full investment for portfolios managed under our Opportunistic Value strategy, however, may take longer to reach, depending on market availability of bonds that meet our yield targets.


READY TO GET STARTED?
To learn more about how we can customize portfolios to meet investors' specific investment objectives, please contact our Advisory Services team by calling (858) 436-2200 or by emailing AdvisoryServices@gurtin.com.