Best National Municipal Bond Closed End Funds

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Closed End Funds or CEFs can provide an attractive alternative for investors to invest in municipal bond. These municipal debt funds provide tax free income for investors. Some of the best municipal bond closed end funds are: PIMCO Municipal Income III, EV Municipal Income, Invesco VK Muni Opps. Trust, etc.

Municipal Bond Fund

Closed end funds are not very popular in investment world and they rarely will get any respects. The closed end funds unlike mutual fund are being traded like stock. This article will provide top 10 national municipal bond closed end funds (CEF) which are tax free. The CEF sponsors include PIMCO, Eaton Vance, BlackRock, Invesco.
Top 10 National Municipal Bond Closed End Funds CEF

The following is the Top 10 Best National Municipal Bond Closed-End Funds:
  1. PIMCO Municipal Income III - PMX
  2. EV Municipal Income - EVN
  3. Invesco VK Muni Opps. Trust - VMO
  4. Invesco VK Muni Invst. Grade T - VGM
  5. EV Municipal Bond II - EIV
  6. BlackRock MuniVest Fund II - MVT
  7. Invesco VK Adv Muni Inc II - VKI
  8. Putnam Managed Muni Income - PMM
  9. Invesco VK Select Sector Muni - VKL
  10. PIMCO Municipal Income - PMF
updated on 11/27/2010

1. PIMCO Municipal Income III - PMX

PIMCO Municipal Income IIIThe PIMCO Municipal Income III Fund is to provide current income that is exempt from Federal income tax. The fund will invest majority (>80%) of its assets in investment grade municipal fixed income debts or bonds. As part of Allianz Global Investors Fund Management fund, this PIMCO fund can use leverage to provide additional distribution to its shareholder. The fund has been managed by John Cummings since 2008.

Top Closed End Funds

The top 5 debt sectors are hospital revenue, water & sewer, tobacco, industrial development / pollution control, and power revenue. The top 5 state municipals are Michigan, Texas, California, Illinois, and Washington. As of February 2011, there are 167 bonds in its fund holding. The total expense is 1.39% per year. It currently sells at 19.71% premium from its net asset value (NAV).

2. Eaton Vance Municipal Income Trust - EVN

As part of Eaton Vance Management fund, the EV Municipal Income Trust Fund seeks current income exempt from regular federal income tax. This municipal bond closed end fund  invest most of assets in investment grade municipal bonds. The fund lead manager is Thomas M. Metzold since 1999. The top 3 sectors are other sectors, Industrial Development and Healthcare.

The top 5 state municipals are Florida, California, New York, Texas and Other States. The fund holdings consist of 187 bonds. The annual expense ratio of this EV fund is 2.07% per year. The fund portfolio average duration is 20.42 years. This fund is classified as long term municipal bond fund. The fund market price has return -0.28% over the past year and 3.73% over the past 3 years.

3. Invesco Van Kampen Municipal Opportunity Trust - VMO

This Invesco VK Municipal Opportunity Trust fund is offered by Invesco Advisers. The Invesco Van Kampen Municipal Opportunity Trust Fund objective is to seek tax free income from federal income tax through investment in investment grade municipal securities and inverse floating rate obligations. The fund has three lead managers such as Wimmel (since 2001), Byron (since 2009), and Stryker (since 2009). 

The top 4 sectors are hospital, airport, IDR / PCR sector, and public power. The fund has a yield of 8.16% per year. This yield represents a taxable equivalent yield of 12.56% based on a federal tax rate of 35%. The top 4 state municipals are Texas, Illinois, California, and New Jersey. There are 342 bonds in its holding currently. The fund total expense is 1.29% per year which is including interest expense of 0.21%. The fund annual portfolio turnover is only 10%. The average bond price in this closed end fund is $96.23.

4. Invesco Van Kampen Municipal Investment Grade Trust - VGM

Invesco Van Kampen Municipal Investment Grade TrustThe Invesco Van Kampen municipal investment grade trust fund objective is to seek high income exempt from federal income tax and to provide capital preservation. The fund will invest in investment grade municipal debts. The fund has been managed collective by managers such as Byron since 1997, Wimmel since 2001, and Stryker since 2009. There is no minimum to invest in this fund. Individual investor or retail investor can purchase this fund through online brokerages such as E*Trade, Fidelity and Zecco. Investor will be charge 1.46% per year of expense ratio.

As of January 2011, this VGM fund market price has return -0.12% over the past year and 4.40% over the past 5 years. The top 5 sectors are hospital, IDR / PCR and airport. The top 5 state municipals are Florida, California, Texas, New York, and Illinois. The fund consists of a total of 483 different bonds issued by variety of states in US.  The fund market price sells at 0.28% premium from its fund NAV. The average coupon in the fund portfolio is 5.56%. The average maturity of the fund portfolio is 16.56 years.

5. Eaton Vance Municipal Bond II - EIV

Similar to Eaton Vance Municipal Income Trust fund (EVN), this EV municipal bond II fund (Ticker: EIV) is part of Eaton Vance Management CEFs. The EV Municipal Bond II Fund investment objective is to provide current income exempt from federal income tax, including alternative minimum tax (AMT). This EV bond fund will invest most of its assets in investment grade municipal securities which rated BBB or higher by rating agencies. As it is traded like a stock, regular investor may buy this CEF using online brokerage like Scottrade, eOption, LightSpeed, etc. Since 2004, William H Ahern has been the lead manager. The annual expense ratio of this fund is 1.60%.
As of January 2011, the top 10 state municipals are New York, Texas, Florida, Massachusetts, California, Pennsylvania, New Jersey, Washington, Illinois, and Arizona. The top 5 bond sectors are water & sewer, health care (acute), general obligation, special tax bonds, and transportation toll. Some of these bonds are insured by insurance companies. There are a total of 106 bonds in the fund’s holding. The fund premium / discount range is between 3.56% and 21.70% for the past year. The fund NAV has return 1.09% over the past 3 years and -0.70% over the past 5 years.

6. BlackRock MuniVest Fund II – MVT

The BlackRock MuniVest Fund II objective is to offer high level of income exempt from federal income taxes. This BlackRock fund will invest in a portfolio of long term investment grade municipal obligations. The fund managers are Theodore R Jaeckel and Walter O'Connor since January 2006. The fund investor will be charged a total expense ratio of 1.26% per year. It also has a yield of 7.93% per year. The fund market price has returned 1.97% over the past year and 7.63% over the past decade.

Best Municipal Funds

As of January 2011, the top 5 sectors are tax backed debts, health bond, transportation, corporate backed municipals, and utility services. The top 5 state municipals are California, Illinois, Texas, New York, and Michigan. The fund consists of 174 debts from variety of states in USA. The total expense is 0.63% per year.  It currently sells at slightly premium from its NAV.

7. Invesco Van Kampen Advantage Municipal Income II - VKI

The Invesco Van Kampen Advantage Municipal Income II objective is to seek high current income exempt from federal income tax and to provide capital preservation. The fund will invest majority of its asset in investment grade municipal bonds. Since 2010, the fund has been managed collectively by Thomas Byron, Robert Wimmel, and Robert Stryker. The fund annual portfolio turnover rate is 9.0%.

The top 4 sectors of this muni bond fund are hospital, IDR / PCR airport, water / sewer, and appropriation bond. The top 5 states municipal are California, Illinois, Texas, Florida, and South Carolina. The fund’s holding has a total 368 bonds. The total expense is 1.28% per year which is including 1.09% baseline expense and 0.19% interest expense. The average maturity of this Invesco fund is 16.52 years.

8. Putnam Managed Muni Income - PMM

Putnam Managed Muni Income FundPutnam Investment Management is the fund’s sponsor of Putnam Managed Municipal Income fund. The Putnam Managed Muni Income fund investment objective is to provide tax free income from Federal income tax. This Putnam fund will invest its assets in high yield municipal debts. The fund managers are Paul Drury, Susan McCormack, and Thalia Meehan. The fund has an annual distribution rate of 7.69%. Investor will be charged an expense ratio of 0.94% per year. Individual investor or institutional investor can invest in this CEF through regular brokerage account such as TD Ameritrade, Merrill Edge or Interactive Brokers (IB).

As of February 2011, the top 8 debt sectors are health care, utilities, transportation, industrials, prerefunded debts, land, and tobacco bonds. The top 5 states municipal are Texas, California, Massachusetts, New York and Ohio. The fund holdings consist of 409 bonds.

9. Invesco Van Kampen Select Sector Muni - VKL

The Invesco Van Kampen Select Sector Muni seeks high current income exempt from Federal income tax with capital preservation through investment in investment grade tax exempt municipal securities. The fund managers are Thomas Byron, Robert Wimmel, and Robert Stryker since 2010. The total expense fee is 1.55% per year. The fund average maturity is 17.47 years. 

The top 3 sectors are hospital, IDR / PCR and appropriation. The top 5 states municipal are California, Texas, Illinois, Washington, and New York. There are 280 bonds in its holding currently. The fund market price is in line from its fund NAV. To invest in this fund, you will need to open a brokerage account and you can buy this Invesco fund online.

10. PIMCO Municipal Income – PMF

As part of Allianz Global Investors Fund Management fund, this PIMCO Municipal Income Fund provides tax free income from federal income tax. This PIMCO closed end fund invests its majority assets in investment grade municipal obligations. John Cummings has been the lead manager since 2008. It also charges an annual expense ratio of 1.46%. 

The top 4 bond sectors of this municipal bond cef are Hospital Revenue Industrial Development /Pollution Control and Tobacco. The top 5 state municipals are Texas, California, Pennsylvania, Louisiana and New Jersey. There are 173 bonds in its holding currently. The fund’s market price usually sells at premium from its fund’s NAV ranging from 5.24% to 29.2%. The fund NAV price has returned -0.13% over the past year and 1.39% over the past five years.

Closed End Fund Profile

NoFund NameTickerYieldMarket CapLipper 1-YREffective LeveragePremium / DiscountExpense RatioPref. Dis.
1PIMCO Municipal Income IIIPMX7.41%$364M7943.33%10.97%1.92%1.16%
2EV Municipal IncomeEVN7.39%$290M7545.90%7.98%2.42%0.38%
3Invesco VK Muni Opps. TrustVMO7.03%$495M4141.41%6.07%1.40%0.39%
4Invesco VK Muni Invst. Grade TVGM6.94%$820M2140.24%5.33%1.46%0.37%
5EV Municipal Bond IIEIV6.92%$137M8545.26%10.57%2.14%0.55%
6BlackRock MuniVest Fund IIMVT6.91%$316M4739.86%3.43%0.63%0.00%
7Invesco VK Adv Muni Inc IIVKI6.85%$565M2241.82%3.48%1.53%0.62%
8Putnam Managed Muni IncomePMM6.77%$447M1323.40%2.36%1.03%0.27%
9Invesco VK Select Sector MuniVKL6.77%$196M241.65%5.81%1.55%0.58%
10PIMCO Municipal IncomePMF6.76%$362M1142.49%17.99%1.63%1.89%
11DWS Strategic Muni IncomeKSM6.75%$150M3836.15%5.64%1.48%0.43%
12EV Municipal BondEIM6.74%$923M9341.49%6.25%2.40%0.00%
13BlackRock Invst. Quality MuniBKN6.73%$254M5236.21%5.42%0.52%0.00%
14Nuveen Dividend Advantage 3NZF6.71%$592M7136.83%-0.41%1.03%0.39%
15PIMCO Municipal Income IIPML6.70%$700M1540.45%4.20%1.72%1.89%
16BlackRock Municipal Income IIBLE6.68%$342M5836.60%2.01%1.18%1.06%
17BlackRock Municipal IncomeBFK6.68%$626M6136.63%3.52%0.50%0.00%
18Nuveen Muni Mkt OpportunitiesNMO6.67%$670M4639.35%3.82%1.31%0.48%
19DWS Municipal IncomeKTF6.66%$493M5741.53%0.16%1.49%0.31%
20BlackRock MuniYieldMYD6.65%$678M536.48%3.19%0.51%0.00%

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