BMO Intermediate Tax-Free Fund

4 / 5 Stars
5 5 4 4 2
Zacks Investment Research
4 (Sell)
Standard & Poor's
4 / 5 Stars
A+ (Buy)

#12 in Muni National Interm

U.S. News evaluated 83 Muni National Interm Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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The fund has returned 5.39 percent over the past year, 4.94 percent over the past three years, 5.46 percent over the past five years, and 4.68 percent over the past decade.

Trailing Returns Updated 06.30.2014
Year to date 4.6%
1 Year 5.4%
3 Years (Annualized) 4.9%
5 Years (Annualized) 5.5%
10 Years (Annualized) 4.7%

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The Marshall Intermediate Tax-Free fund has been holding its own.
As of July 03, 2014, the fund has assets totaling almost $1.34 billion invested in 1,166 different holdings. Its portfolio consists of municipal bonds (debt issued by state and local governments, as well as their agencies).
This municipal bond fund performed well during the turbulence of the credit crisis. In 2008, when the municipal bond market foundered, this fund managed to eke out a positive return. That feat is a testament to management’s steady approach, which emphasizes bonds at the higher end of the credit spectrum. Says Morningstar: “As is also typical, the managers avoided more-volatile sectors, including airlines and tobacco, which were heavily punished in 2008. These moves helped keep the fund in the black that year, even as two-thirds of its peers lost money.” Coming out of the recession, the fund profited from its exposure to healthcare and construction bonds. Still, management admits that it could have benefitted from more risk. “In hindsight, had we fully anticipated the sharp decline in rates, perhaps a more aggressive duration posture may have been appropriate, but with rates already low, erring on the side of caution seemed the prudent stance,” according to the fund’s latest annual report. Going forward, one of the bigger risks for the fund is rising interest rates. Rates, which are at historic lows, can only go up, and when that happens, bond prices will go down. The fund has returned 5.39 percent over the past year and 4.94 percent over the past three years.
Historically, the fund has done a fine job of achieving its goal: providing investors with steady income and tax advantages (muni investors traditionally do not need to pay federal income taxes on their interest). The fund has had very few blockbuster years, but it has long been a consistent performer. As of the end of October, the fund’s trailing 10-year returns landed it in the top 17 percent of Morningstar’s intermediate-term national municipal bond category. The fund has returned 5.46 percent over the past five years and 4.68 percent over the past decade.

Investment Strategy

According to the fund’s prospectus: “The Adviser selects Fund investments after assessing factors such as the cyclical trend in interest rates, the shape of the municipal yield curve, tax rates, sector valuation and municipal bond supply ... The Fund normally maintains an average dollar-weighted effective maturity of three to ten years. Effective maturity takes into account the possibility that a bond may have prepayments or may be called by the issuer before its stated maturity date.”

Role in Portfolio

Morningstar calls the fund a “core” holding.


John Boritzke and Duane McAllister manage the fund.


BMO Intermediate Tax-Free Fund has an expense ratio of 0.55 percent.

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Going forward, one of the bigger risks is rising interest rates. When interest rates go up, bond prices will fall.

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