The municipal bond market is large and highly fragmented with more than $4.3 trillion distributed across more than one million distinct bonds and 50,000 issuers.¹ This fragmentation has resulted in significant dispersion of yields and prices for similar bonds, a dynamic that has provided skilled credit managers with ample opportunity to leverage their underwriting acumen to identify potential mispricings in the market.² 

We believe that this opportunity is particularly abundant within the large cohort of unrated bonds. Often due to cost relative to issue size, municipalities sometimes forego bond ratings by nationally recognized statistical rating organizations (NRSRO) such as Moody’s or S&P Global. For these unrated bonds, a prospective investor is solely responsible for assessing the bond’s creditworthiness. To compensate for greater complexity and information risk involved with these bonds, however, they typically pay investors a higher yield compared to rated issuers of similar quality.

Unrated bonds are not necessarily risker than rated bonds. While unsecured corporate bonds are typically backed by the creditworthiness of the issuer, municipal bonds—including unrated issues— generally come with greater security and are backed by the full faith and credit of the issuing municipality or income streams from specific projects.

Independent credit work on nonrated munis may be especially rewarding because the significant dispersion of yields and pricing among unrated bonds suggests potentially rich opportunity for skilled analysts to uncover favorable yields and returns relative to credit quality and default risk.

As Baby Boomers and older generations pass their wealth to heirs, spouses and charities over the next decade, we will see the largest shift of assets ever recorded, reshaping who controls investment capital. Estimated at $124 trillion through 2048, this “Great Wealth Transfer” will create significant opportunities and challenges for Gen X, Millennials and especially women, who are poised to become chief stewards of this wealth.¹

As this transfer begins, the financial services industry is facing a looming shortage of advisors because 100,000 financial professionals are projected to retire by 2034. Many firms lack clear succession plans for these retiring advisors, putting an estimated $10.4 trillion in assets at risk of attrition or mismanagement. Meanwhile, new advisor recruitment has slowed, and the pool of young, entry-level advisors has shrunk down by 60% among those under age 25 since 2022.²

Despite growing interest in self-directed investing, the next generation shows a strong desire for professional guidance. A Wall Street Journal Intelligence Study finds that 80% of Millennials plan to use a financial advisor after receiving significant wealth, and nearly half expect to choose a new advisor once they inherit assets. Women, who are likely to outlive men and gain greater financial control, overwhelmingly want advisors who take a holistic view of life goals alongside traditional financial planning. Without proactive client engagement efforts, firms may risk losing long-held assets as heirs seek personalized, modern advice.

First Eagle Academy is dedicated to helping advisors thrive through these unprecedented opportunities and challenges. Through interactive seminars and workshops and practical tools, the Academy helps advisors not only attract and retain generations of clients but also ensure smooth transitions and holistic financial guidance for families during times of change.

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