Fixed Income
Tax-Exempt
Actively Navigating the Municipal Bond Market
Madison offers a range of federally tax-exempt and tax-efficient strategies designed to provide investors with a transparent, risk-managed bond allocation. These strategies, which include actively managed and laddered approaches, invest in high-quality municipal bonds to support client objectives such as generating federally tax-free income or pursuing strong risk-adjusted returns.
Philosophy and Approach
The municipal bond market is vast and often inefficient, with more than one million active issues. We believe that by investing in high-quality municipal bonds, investors can achieve favorable federally tax-free income while optimizing the risk/reward balance through the identification of market mispricings. Our process combines top-down macroeconomic analysis with rigorous bottom-up credit research to build a comprehensive valuation framework, recognizing that each issuer carries unique risks. We then seek value within an opportunity set of bonds that meet our strict criteria, sourced from both primary and secondary markets. The resulting client portfolio seeks to strike an appropriate balance between creditworthiness, diversification, structure, valuation, and liquidity.
Strategies
Madison Municipal Bond Ladders
Madison’s Municipal Bond Ladders are actively monitored bond portfolios designed to pursue stable tax-exempt income streams while seeking capital preservation and reduced interest rate risk. The strategy invests in investment-grade bonds of states, municipalities, and other tax-exempt issuers. The strategy is available in three laddered maturity structures: 1-5 years, 1-10 years, and 1-15 years.
Madison Intermediate Municipal Bond
Madison’s Intermediate Municipal Bond strategy is an actively managed bond portfolio that invests in high quality bonds of states, municipalities, and other tax-exempt issuers. To pursue our goal of superior returns while minimizing the risk of permanent capital loss, we combine a top-down macro review with bottom-up credit analysis to construct a portfolio of investment-grade municipal bonds with maturities between 1-10 years.
Madison Municipal Bond
Madison’s Municipal Bond strategy is an actively managed bond portfolio that invests in high quality bonds of states, municipalities, and other tax-exempt issuers. To pursue our goal of superior returns while minimizing the risk of permanent capital loss, we combine a top-down macro review with bottom-up credit analysis to construct a portfolio of investment-grade municipal bonds with maturities between 1-22 years.
Madison Tax-Advantaged Income
Madison’s Tax-Advantaged Income strategy is an actively managed bond portfolio consisting of both taxable and tax-exempt bonds. The strategy seeks superior risk-adjusted returns by investing at least 50% in federally tax-exempt municipal bonds with maturities ranging from 0 to 12 years and up to 50% investment grade U.S. Treasury, agency, or corporate bonds with maturities ranging between 0 to 5 years.
Madison Municipal Bond Team
Jeffrey Matthias, CFA®, CAIA®, CIPM®, CFP®
Portfolio Manager
Michael Peters, CFA®
Portfolio Manager, Analyst
Katherine Doyle
Portfolio Manager, Credit Analyst
Mike Sanders, CFA®, FRM®
Head of Fixed Income, Portfolio Manager
Michael Wachter, CFA®
Co-Head of Reinhart Fixed Income, Portfolio Manager
Related Insights
In addition to the ongoing market risk applicable to portfolio securities, bonds are subject to interest rate risk, credit risk and inflation risk. When interest rates rise, bond prices fall; generally, the longer a bond’s maturity, the more sensitive it is to this risk. Credit risk is the possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. Bonds may also be subject to call risk, which allows the issuer to retain the right to redeem the debt, fully or partially, before the scheduled maturity date. Proceeds from sales prior to maturity may be more or less than originally invested due to changes in market conditions or changes in the credit quality of the issuer.
Madison does not provide tax or legal advice. Please consult with a qualified professional in this area.
Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax. Capital gains are not exempt from federal income tax.
Diversification does not assure a profit or protect against loss in a declining market.
It is Madison’s opinion that the bond market is inefficient. There is no guarantee that these inefficiencies exist or that Madison can identify or use them.