SOCIALLY RESPONSIBLE INVESTING: MUNIS GO MAINSTREAM BY JAMES DEARBORN 2016 GLOBAL PERSPECTIVES

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Loraine Holland
5 years ago
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1 SOCIALLY RESPONSIBLE INVESTING: MUNIS GO MAINSTREAM BY JAMES DEARBORN 2016 GLOBAL PERSPECTIVES

2 SOCIALLY RESPONSIBLE INVESTING: MUNIS GO MAINSTREAM Municipal bonds become a mainstream component of socially responsible investing as investors realize that doing well and doing good are not mutually exclusive. Socially responsible investing is not a fad. It continues to grow with investors who are pursuing both financial and social returns. We believe this is an area poised to gain even more attention in In recent studies, investors particularly women and millennials have cited social factors (environment, education, health care, etc.) as an increasingly important driver of their investment decisions. And asset managers are responding. Encouraged by increasing demand and awareness that social investing is not a detractor from investment performance, asset managers are growing their suite of products that use exclusionary screens, assess environmental, social and governance (ESG) criteria or employ other impact considerations. Assets under management ($ trillion) The socially responsible asset class is growing rapidly Source: U.S. SIF, The Forum for Sustainable and Responsible Investment, 2014 Assets under management held in sustainable, responsible and impact strategies An untapped source of social and financial capital Within this large and growing pool of socially aware investments, fixedincome investments are materially underrepresented and, within fixed income, municipal bonds represent only a tiny sliver. Despite their low profile to date, municipal bonds offer socially conscious investors a host of attractive investment possibilities. By nature, municipalities are largely designed for public service and are a natural fit for socially aware investors. With munis supporting many public goods (transportation, clean water, renewable energy, etc.) as well as delivering on areas of maximum social impact (health care, affordable housing, education, the environment, etc.), municipal bonds offer a $3.7 trillion largely untapped market. Better still, municipal bonds are a high-quality, dependable asset class that offers the possibility of attractive returns especially given that interest on most muni bonds is exempt from federal and/or state income tax.

Pushing municipal bonds to the forefront For 2016, we anticipate that more investment managers will tout municipal bonds as a viable investment option for socially conscious investors.

These investment vehicles will focus not only on traditional environmental, social and governance factors but also on specific municipal sectors and issuers associated with positive social impacts, e.

3 Pushing municipal bonds to the forefront For 2016, we anticipate that more investment managers will tout municipal bonds as a viable investment option for socially conscious investors. We believe that asset managers will offer new mutual funds and separately managed accounts as a means by which retail and institutional investors can participate in this growing area. These investment vehicles will focus not only on traditional environmental, social and governance factors but also on specific municipal sectors and issuers associated with positive social impacts, e.g., health care, education and low-income housing. We also expect 2016 to be the year when municipal issuers begin to disclose more on the positive social benefits they provide their communities. Many not-for-profit hospitals already produce an annual community benefit report detailing their progress on community-focused activities and services. And many municipal issuers of green bonds have committed to providing annual updates on the use of proceeds and the nature of the environmental benefits derived from bond-funded projects. We believe this trend will continue to gain popularity, benefiting municipal issuers and socially conscious investors for a long time to come. JAMES DEARBORN Senior Portfolio Manager and Head of Municipal Bond Investments James and his investment team manage 19 mutual funds as well as numerous institutional and high-net-worth accounts.

4 There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Investing involves risk including the risk of loss of principal. The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Columbia Management Investment Advisers, LLC (CMIA) associates or affiliates. Actual investments or investment decisions made by CMIA and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results and no forecast should be considered a guarantee either. Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that any forecasts are accurate. Securities referenced should not be construed as a recommendation to buy or sell.

5 About Columbia Threadneedle Investments Columbia Threadneedle Investments is a leading global asset management group that provides a broad range of actively managed investment strategies and solutions for individual, institutional and corporate clients around the world. With more than 2,000 people, including over 450 investment professionals based in North America, Europe and Asia, we manage $471 billion* of assets across developed and emerging market equities, fixed income, asset allocation solutions and alternatives. We are the 13th largest manager of long-term mutual fund assets in the U.S.** and the 4th largest manager of retail funds in the U.K.*** Our priority is the investment success of our clients. We aim to deliver the investment outcomes they expect through an investment approach that is team-based, performance-driven and risk-aware. Our culture is dynamic and interactive. By sharing our insights across asset classes and geographies, we generate richer perspectives on global, regional and local investment landscapes. The ability to exchange and debate investment ideas in a collaborative environment enriches our teams investment processes. More importantly, it results in better informed investment decisions for our clients. To find out more, call or visit columbiathreadneedle.com/us * In U.S. dollars as of September 30, Source: Ameriprise Q3 Earnings Release. Includes all assets managed by entities in the Columbia and Threadneedle groups of companies. Contact us for more current data. ** Source: ICI as of September 30, 2015 for Columbia Management Investment Advisers, LLC. *** Source: Investment Association as of September 2015 for Threadneedle. Securities products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC. Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA Columbia Management Investment Advisers, LLC. All rights reserved. 11W2 (01/16)

DURATION, LIQUIDITY AND DEFAULTS, OH MY! BY COLIN LUNDGREN, CFA AND GENE TANNUZZO, CFA 2016 GLOBAL PERSPECTIVES

DURATION, LIQUIDITY AND DEFAULTS, OH MY! BY COLIN LUNDGREN, CFA AND GENE TANNUZZO, CFA 216 GLOBAL PERSPECTIVES DURATION, LIQUIDITY AND DEFAULTS, OH MY! Duration-bitten portfolio managers may be capitulating