Enhanced Intermediate Tax Exempt Strategy

 

Objective:

APA seeks to provide a high level of income exempt from federal income tax by investing primarily in lower rated municipal bonds. The Strategy seeks to exploit investment opportunities in the high-yield market, primarily through diversified exposure to high-yield municipal bonds.  Investment opportunities that maximize total return are sought through a well-defined investment process that has been in place for over 25 years.

Strategy:

APA’s primary focus is to purchase attractively priced, quality, high yield municipal bonds. At the same time, we seek to manage the risk of lower-rated securities through careful and in depth credit analysis.

APA Municipal Bond Team:

Veteran Portfolio Manager, Ken Woods, and Portfolio  Manager, Kyle Gerberding, direct the Strategy’s active management and draw upon the expertise of our municipal traders and credit analysts. Nine investment professionals, including a credit research team, portfolio managers and analysts focused on this strategy. Together, the team identifies issuers, evaluates credit fundamentals and implements a relative value trading approach.

Investor Benefits:

  • Of APA’s strategies, it provides the highest potential for tax exempt current income and  capital appreciation.
  • Lower default risk than corporate high income.

 

Disclosures:


Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The performance and portfolio characteristics shown relate to the APA High Quality Intermediate Tax-Exempt Composite (the “Composite”).

Composite Description: Asset Preservation Advisors (“APA”) uses a fixed income strategy focused on high quality intermediate municipal bonds. The investment objective of the APA High Quality Intermediate Tax-Exempt Composite is total return through income with a focus on controlling portfolio volatility. When constructing an intermediate portfolio, APA conducts an analysis of yield curve, credit and sector and then seeks diversification through a wide number of issues and sectors. Securities selected for these portfolios are typically investment grade issues with intermediate maturities.

Not every client's account will have these exact characteristics. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market predicaments at the time of investment. APA reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account's portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account's entire portfolio, and in the aggregate may represent only a small percentage of an account's portfolio holdings. It should not be assumed that any of the security transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

APA is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about the advisor including its investment strategies and objectives can be obtained by visiting www.assetpreservationadvisors.com. A list of composite descriptions is available upon request.

The Composite contains fully discretionary, fee paying accounts with a minimum asset level of $1MM. For comparison purposes, the Composite is measured against the BofA Merrill Lynch 1-12 Year US Municipal Securities Index. This index tracks the performance of US dollar denominated investment grade tax-exempt debt publicly issued by US states and territories, and their political subdivisions, in the US domestic market. Qualifying securities must have at least 1 year and less than 12 years remaining term to final maturity, a fixed coupon schedule and an investment grade rating (based on an average of Moody’s, S&P and Fitch). The volatility (standard deviation) of the composite may be greater than that of the index. It is not possible to invest in the index. Leverage, derivatives or short positions are not used in this Composite. The annual composite dispersion is an equal-weighted standard deviation calculated for the accounts in the composite for the entire year. For this Composite, APA defines a significant cash flow as greater than or equal to 30% of an account’s market value at the beginning of the measurement period. Accounts removed from the composite due to significant cash flows will be excluded for a grace period of one month. This significant cash flow policy has been applied for the entire history of the Composite. The U.S. Dollar is used to express performance. The APA High Quality Intermediate Tax-Exempt Composite was created December 31, 2009.

Asset Preservation Advisors, Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Asset Preservation Advisors, Inc. has been independently verified for the periods January 1, 2004 through December 31, 2017. A copy of the verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

The three-year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. The standard deviation is not presented for 2002 through 2010 because monthly composite and benchmark returns were not available and is not required for periods prior to 2011. Prior to January 2010 composite returns were calculated quarterly, therefore monthly returns for the 36-month period ended December 31, 2011 are not available and the standard deviation of the composite and benchmark are not presented.

Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. Gross returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. For example, a 0.50% annual fee deducted quarterly (0.125%) from an account with a ten year annualized growth rate of 5% will produce a net result of 4.4%. Actual performance results will vary from this example. Net returns were calculated using the highest management fee charged within the Composite through December 31, 2017. From January 2018 to present, APA uses actual fees to calculate net of fee performance. The Composite includes wrap/bundled fee accounts. In addition to brokerage commissions, this asset-based fee may include custodial, administrative and other expenses associated with the wrap sponsor’s management of the accounts. APA does not receive any portion of the wrap fees paid by the client, except for management fees as stated in our contract with the corresponding wrap program sponsor. The Firm’s policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

The fee schedule for APA’s investment advisory services for separately managed accounts in the APA High Quality Intermediate Tax-Exempt Composite is 0.50% on the first $10 million in net assets under management and 0.40% on amounts above $10 million in net assets under management. Actual investment advisory fees incurred by clients may vary. A complete description of APA’s fee schedule can be found in Part 2 of its FORM-ADV which is available at www.assetpreservationadvisors.com or by calling (404) 261-1333.