BMOP targets higher-yielding corners of the muni bond market by actively selecting bonds across credit qualities and maturities. The fund aims to generate tax-free income that beats passive muni indexes by taking measured credit and duration bets.
How It Works
The fund employs active management to hunt for value across the entire municipal spectrum — from AAA-rated state GOs to BBB hospital revenue bonds. Portfolio managers dynamically adjust duration positioning and credit exposure based on relative value opportunities. Unlike passive muni ETFs that stick to investment-grade bonds, BMOP can venture into high-yield munis when risk/reward looks attractive.
Key Features
- Active management allows tactical shifts between credit qualities and sectors most passive muni ETFs can't make
- Can hold up to 35% in high-yield munis, capturing higher tax-exempt yields than investment-grade-only funds
- Federally tax-free income with potential state tax benefits depending on holdings and investor location
Risks
- Credit risk from lower-rated munis could lead to defaults — high-yield muni defaults historically run 0.5-1% annually
- Interest rate sensitivity means a 1% rate rise could knock 5-7% off NAV depending on duration positioning
- Liquidity can evaporate in muni selloffs, creating 2-3% bid-ask spreads on underlying bonds during stress
Who Should Own This
Best suited for high-tax-bracket investors who want more yield than vanilla muni funds offer and can stomach some credit risk. Works as a tax-efficient income sleeve for those already maxing out investment-grade muni exposure. The active approach makes sense for investors worried about rising rates or seeking opportunistic credit plays in the muni space.