Ron Schwartz of Seix Investment Advisors is “basically pounding the table and telling people to ‘buy munis at this time.’”

Schwartz, senior portfolio manager of the RidgeWorth SEIX Investment Grade Tax-Exempt Municipal Bond Fund, talked with ThinkAdvisor about why the municipal market is so attractive right now. (Schwartz also manages the RidgeWorth Seix High Grade Municipal Bond Fund and RidgeWorth Seix Short-Term Municipal Bond Fund.)

“We’re pretty bullish on the municipal market,” he told ThinkAdvisor. “We think that this is going to be an asset class that is going to outperform in the years to come.”

One reason Schwartz is so hot on munis is that it’s the “only tax-exempt investment out there.”

“Taxes are high,” he said. “We don’t think taxes are going to go lower anytime in the future.”

The other reason is that issuance of municipal bonds is up.

“We’ve seen record amounts of issuance in September and October,” Schwartz said.

In September, Blackrock reported a municipal issuance of $35.7 billion, which represented the largest September supply on record and followed record-setting August issuance. According to Blackrock, the September supply was up 51% versus 2015; it was also 35% above the five-year average and 28% higher than the 10-year average.

LPL research also showed how issuance surged in September.

Schwartz warns that this surge will likely slow down very soon.

“Issuance might continue into November, but by the end of November issuance is going to slow down and December it usually slows down even more and January is usually a slow month also,” he said.

Why is this record issuance happening right now?

According to Schwartz, “I think all of a sudden issuers looked at it and said, ‘We want to issue before the election, and we want to issue before the Fed in December.’ So all of a sudden everybody jumped on there and did it.”

Because of this overwhelming amount of supply, the municipal market has “cheapened up.”

“The supply is overwhelming that demand factor on a national basis,” Schwartz said. Adding, “We think right now, because of this supply, it’s a buying opportunity. If anybody is considering going into the municipal market in the next three, four months, we would say go in now. Go in now, or beginning of November.”

By December, Schwartz doesn’t think supply will still be “overwhelming.”

“All of a sudden that supply-and-demand factor changes and that’s where we think some of that performance is going to come,” he said. “Get in now and then I think over the next few months, you’re going to see some good, relative performance.”

Schwartz doesn’t expect demand for munis to slow down, largely because he doesn’t expect taxes to lower over the next few years.

“We just think the demand factor is going to be strong, remain strong,” he said. “Maybe it’s not going to have flows like we did this year, but still individuals are going to continue to invest in municipal bonds. Especially with taxes as high as they are. We don’t really see the realistic possibility for tax reform any time in the near future – regardless of who wins the presidential election.”

For high-net-worth individuals, in particular, Schwartz sees munis as an attractive investment.

“We think people in higher tax bracket should always have a core holding in municipals,” he said.

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