Oppenheimer Asset Management Inc. this year will begin buying riskier debt used to finance institutions such as prisons and nursing homes, said Tim Pynchon, who will manage the high-yield municipal funds.
Pynchon, 53, who specializes in municipal debt rated below investment grade, left Boston-based Pioneer Investment Management Inc. in May after 13 years and joined Oppenheimer Asset Management this month. The firm oversees about $1 billion of investment-grade state and local debt, Pynchon said in a telephone interview.
Investors snapping up safer securities in the wake of the longest recession since the 1930s have pushed interest rates below historical averages. That means firms must look for higher relative yields from riskier investments to boost earnings.
“This market is really interesting right now,” said Pynchon, who will remain in Boston.
In the $3.7 trillion municipal-bond market, yields on general-obligations maturing in 20 years were 4.16 percent last week, compared with the 10-year average of 4.42 percent, according to a Bond Buyer index.
Oppenheimer Asset Management, a unit of Oppenheimer Holdings Inc. (OPY:US), will begin buying high-yield municipal debt after such securities gained in value in 2012 for the fourth straight year, Barclays Plc data show.
High-yield munis have earned 0.93 percent this year compared with 9.4 percent during the same time in 2012. Still, riskier munis are beating the broader muni market’s 0.98 loss this year.
“There are still high-yield bonds out there were you can get a 7 percent yield,” Pynchon said. “To the degree that one selects credits carefully and fits those in a portfolio, that can create tremendous value.”
Pynchon plans to start the funds in the fourth quarter, focusing on debt sold by continuing-care retirement communities, nursing homes, airports, private prisons and charter schools. Pynchon also plans to buy bonds repaid with tobacco-settlement payments.
Pioneer High Income Municipal Fund (HIMYX:US), which Pynchon ran, earned 21.1 percent last year, compared with 18 percent for Barclays’s high-yield muni index.
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