Artifex Folios

Durable Investment Portfolios Customized to Your Goals


November 30, 2012

The AFG  CMI, or Core Municipal  Income model, is comprised of exchange-traded funds (ETF’s) and mutual funds that focus on bonds issued by cities, states and public taxing authorities and that therefore qualify for tax-favored treatment on their interest payments. We have a preference in general for intermediate to shorter-term debt at this point in the bond / economic cycles.  This model has been an over-achiever in that the returns we have enjoyed are far in excess of what we expected.

While this remains a suitable portfolio for bond diversification in taxable accounts, we do not believe that municipal bonds will perform this well indefinitely.   We stand ready to make adjustments in the event that the US economy heats up dramatically and / or in the event that interest rates trend upward.

The inception date of this model is 11/4/09 and it has generated a total return of 49.15% vs.benchmark return (PIMCO Intermediate Municipal Bond ETF) of 23.05% since that date.  This model’s return for 2016 (1/1/2016 - 12/31/16) was -.13% vs the benchmark return of -.66%. It’s important to remember that the yield on this model is largely tax-favored.

Model Risk Metrics as of 1/18/2017:

Beta vs. S&P 500: .03 / Low

Volatility / Absolute risk: 5.99% / Low

Dividend Yield: 4.22%

Representative Holdings:

BFF - BlackRock Municipal Income Investment Quality Trust

MUI - BlackRock Municipal Intermediate Duration Fund

MUB - iShares National AMT - Free Municipal

SHM - Nuveen Barclays ST Municipal Bond ETF

SBI - Western Asset Intermediate Municipal Fund