Cavanal Hill on New Ultra Short
Cavanal Hill Investments' Senior Tax-Free Portfolio Manager Rich Williams talks in a new video about the manager's new Ultra Short Tax-Free Income Fund. He says, "[We're] excited to launch the ultra short tax free income fund for a couple of reasons: First, we're finally in the right environment where we are seeing some attractive yields in the short end of the maturity curve. We've been in a low rate environment for several years. But the Federal Reserve has raised rates 3 times in 2017, and they've indicated that they'd like to ... continue going into the next year. So it will be nice to have some yields there. Secondly, [there's been] a lot of talk around tax reform of late, and it looks like the main focus for tax reform is going to be on the corporate side. They're leaving the individual rates alone for the most part, with a little bit of tweaking. But what that means for municipal investors, especially those in the higher tax brackets, is municipal yields look very attractive on a tax equivalent basis. Based on the right environment and based on the tax reform situation, we think the timing is right to launch the Ultra Short Tax-Free Fund." He adds, "The basic concept for the new fund will be focusing on variable rate instruments, as well as fixed rate. The variable rate demand notes, the nice thing about those is that they have a reset every week, and they also have weekly liquidity. So those will be able to capture any rate increases if the Fed does raise rates in 2018. They'll be able to capture the incremental yield there, and then on the fixed rate side we'll be looking for opportunities in the 6 to 9 to 12 month range where we can lock in some really nice yields and that would take some of the cyclicality out that the variable rate demand notes have.... We're very excited about the new fund, and we think it's especially attractive for those investors not only in the higher tax brackets but also for those concerned about a rising rate environment."
