One factor aggravating volatility in munis this year: Asset managers’ increasing share of a $4 trillion market once dominated by buy-and-hold individual investors. The share of outstanding municipal bonds held by U.S. households fell to 40% in the first three months of the year from 46% in 2020, according to a Municipal Securities Rulemaking Board report scheduled for release Wednesday. The board, a self-regulatory body overseeing the muni market, analyzed Federal Reserve data and determined that the market is shifting from direct ownership of bonds to investment through funds. The true amount held outright by buy-and-hold retail investors through individual brokerage accounts is likely closer to 20%, because the Fed includes some Wall Street-managed accounts in its household category. So-called separately managed accounts are run by an asset manager on behalf of a single investor. Those hold about 18% of munis, according to Citigroup.
Source: WSJ.com: Markets
