Invesco Closing High-Yield Muni Fund as Supply Dries Up

Invesco Inc. (IVZ), which runs the third-largest high-yield municipal bond fund, is closing it to new investors on Aug. 1 as sales of local junk debt dwindle.

The $6.74 billion Invesco High Yield Municipal Fund (ACTHX), whose ticker is ACTHX, will stop taking cash from new investors because there are fewer lower-rated municipal sales from which to choose, said Mark Paris, who helps manage the fund. It’s earned 9.7 percent this year, beating 75 percent of similar funds, data compiled by Bloomberg show.

“We can’t find enough new supply in the marketplace,” Paris said in a telephone interview.

Municipalities rated below investment grade have sold about $900 million of debt this year, less than half the $2 billion issued during the same period in 2013, Bloomberg data show. This year’s tally doesn’t include Puerto Rico’s $3.5 billion deal in March, the biggest junk-rated muni sale ever, which was tailored to nontraditional muni buyers such as hedge funds.

“In order to best serve investors in our funds, we may periodically limit asset inflows when we believe these inflows may outpace attractive investment opportunities,” the Atlanta-based company said in a June 27 statement. Invesco oversees about $20 billion of munis.

The drop in supply of riskier local debt has boosted the value of the securities in 2014. High-yield muni bonds have earned 7.5 percent this year through July 14, beating the 5.6 percent gain in the broader $3.7 trillion market, according to S&P Dow Jones Indices.

The Invesco fund trails only the $9 billion Nuveen High Yield Municipal Bond Fund (NHMAX) and the $8.17 billion Franklin High Yield Tax-Free Income Fund. (FRHIX)

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet

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