BondView LLC, which offers a free site for municipal-bond in-vestors, has launched ratings of muni-bond funds.
Unlike Morningstar Inc. or Lipper Inc., which rate muni-bond funds based on past performance, BondView's ratings are based on assessments of the individual bonds within the portfolios, said Robert Kane, founder of BondView.
“This isn't just ratings-based on risk-adjusted past performance. We are trying to incorporate a holdings-based analysis,” Mr. Kane said.
BondView has been rating individual bonds for the past year.
PROPRIETARY APPROACH
Those ratings are based on a proprietary approach that doesn't take into consideration third-party credit ratings, Mr. Kane said.
Investors can go to BondView's website and access real-time ratings for 100 open-end and closed-end muni-bond funds.
During the next several months, the firm hopes to make ratings available for all such funds. All the ratings will be available free of charge on the firm's website.
The ratings are based on five criteria: market pricing, duration, income stream and maturity, market sector and diversification.
Each fund will be rated A-F for each category and then given an overall score, Mr. Kane said.
Regulators are increasingly scrutinizing the transparency, or lack thereof, of muni-bond funds.
In May 2010, the Securities and Exchange Commission launched an investigation into the muni-bond market. Since then, the Municipal Securities Rulemaking Board, which oversees muni-bond issuers and sellers, has proposed or passed rules designed to increase disclosure of information about muni bonds.
“The municipal-bond market isn't transparent enough, and when you put a layer of funds over it, it makes it even cloudier,” Mr. Kane said. “We are trying to put all of the funds under a microscope.”
E-mail Jessica Toonkel at jtoonkel@investmentnews.com.
