John Miller’s new high-yield municipal-bond fund has amassed $1 billion of assets in just under five months, drawing buyers eager to invest in the riskiest segment of state and local-government debt.
Miller joined First Eagle Investments in January after nearly three decades at Nuveen, where he built up what is still the largest high-yield muni fund, a market behemoth with a high-risk, high-return strategy that remains among the market’s top performers.
“We believe the fund’s popularity with investors is attributable to our disciplined investment approach, rigorous credit analysis and attractive income profile,” Miller said in a statement on Monday about his First Eagle fund.
The $1 billion level marks a major milestone for Miller, 57, after he left Nuveen in June. That was two months after the New York-based asset manager settled a years-long legal battle with Preston Hollow Community Capital, a lender that accused Miller of seeking to blackball it on Wall Street.
Market-wide, high-yield muni funds have gained $5.7 billion this year, according to LSEG Lipper Global Fund Flows data. Miller’s First Eagle fund started with about $130 million of assets at the beginning of the year after it was converted from a corporate-bond strategy, meaning that it saw investments grow roughly eightfold. Meanwhile, assets in Nuveen’s flagship high-yield fund are at $16.1 billion as of May 8, according to the firm. That’s up from $15.8 billion at year end.
“We always welcome increased market participation as it is in the best interests of investors and the industry,” Sally Lyden, a Nuveen spokesperson, said in a statement.
The First Eagle portfolio includes some of Miller’s favorite credits. The two biggest positions are securities issued for Brightline, a rail line between Miami and Orlando that’s the first new US private passenger train built in the US in more than a century. He also holds bonds that financed a casino in New York and an Arkansas steel mill, according to data compiled by Bloomberg.
“Our fundamentally driven, value-oriented philosophy seeks underrated and undervalued credits across what is a vast and fragmented municipal bond market, often leading us to areas where value can be more challenging to discern,” Miller said in the statement.
About 63% of the bonds in the fund’s portfolio as of March 31 were unrated and almost 18% were below investment grade, according to the website. First Eagle Investments has about $138 billion in assets under management as of March.
Fee Waiver
To entice new buyers and protect the interests of the funds’ previous investors, First Eagle waived its 45 basis point management fee through April 30 and has capped fees through February 2025, according to the firm’s website.
The smaller pool of capital compared to what Miller wielded at Nuveen allows him to be more nimble in choosing bonds, said Pat Dwyer, a managing director at NewEdge Wealth in Miami, Dwyer had invested with Miller for decades and in January moved clients money to First Eagle.
“He’s going to get to pick and choose what he buys,” said Dwyer, who called Miller “the king” of high-yield muni bonds. “He’s not going to have to take down a giant block of bonds because he’s got to put a billion dollars worth to work next week.”
The fund is drawing long-term First Eagle clients who are dipping into high-yield munis for the first time as well as new investors seeking to tap higher rates, Miller said. Investors include people from outside the major money centers, in states such as Alabama and South Dakota, he said.
“A surprisingly significant portion of the investments have come from brand new investors who may be attracted to the timing of the entry point with rates near 17-year highs, the nimble nature of the fund and merits of the high-yield municipal asset class,” Miller said.
Miller’s First Eagle fund has returned about 5.6% this year, the top among national long-term muni-high-yield funds, benefiting from lower fees and getting invested in a higher-interest rate environment.
His old fund at Nuveen has returned 2.5% by comparison, beating 89% of its peers, according to data compiled by Bloomberg.
Over his tenure at Nuveen, the firm’s flagship high-yield fund was a top performer, a result that came with a good deal of volatility. Nuveen amped up the fund’s risky holdings — much of them non-rated and illiquid — by employing leverage. The strategy turbocharged the fund’s return in a period of declining interest rates but left it exposed to violent downturns.
For example, the fund dropped 40% in 2008 during the global financial crisis, rebounding the following year with a 42% gain.
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