BNY Mellon US Municipal Infrastructure Debt Fund: An investment that investors could consider in turbulent markets

US municipal bonds could potentially help investors to manage risk and offer a potential stream of income amid market uncertainty

Infrastructure-linked municipal bonds, unlike corporate bonds, are often issued by individual states. And some of these states have economies large enough to rival certain sovereign states. PHOTO: BNY MELLON

Interest rate hikes and geopolitical tensions have caused great market volatility. However, thanks to high credit ratings and low correlation with other asset classes, US municipal bonds could potentially offer investors a way to mitigate risk and sail through the current turbulent times.

US municipal infrastructure bonds are issued by US states, cities or local government bodies. Their history can be traced back more than a century when the first recorded US municipal bond was issued by the New York City government in 1812for the construction of a canal.

Today, the US municipal bond market has become a large and mature market that serves as a major source of funding to back public projects. There are currently 56,248 issuers on the market, representing almost US$4 trillion2 in lending, and supplying around 80% of the capital needed for US infrastructure maintenance and development. Some of the projects backed by such bonds concern airports, mass transit, water supply systems, power generation, electrical transmission and even colleges and hospitals.

Many states in the US are currently battling ageing infrastructure, and in response, the Biden administration rolled out a US$1.2 trillion3 infrastructure plan at the end of 2021 in order to build and renovate infrastructure facilities.


US municipal infrastructure bonds have long been popular with US investors, in part because of the potential income stream they can offer.

Tightened monetary policy may pose a challenge to bond investors because higher interest rates can make the interest paid out by some bonds look less attractive and depress bond prices. However, based on historical data, in spite of increases in interest rates, municipal bond performance (including reinvestment of income) has been able to deliver positive returns most of the time4. Furthermore, municipal bonds have delivered higher returns and been exposed less to volatility than comparable Treasuries5.

Research shows that over three-year rolling periods, yields on 10-year municipal bonds exhibited only 65%6 of the volatility seen in 10-year Treasuries.

US municipal bonds have always been regarded as a high-quality asset class. Compared to corporate bonds, infrastructure-linked municipal bonds are often issued by the individual states, some of whose economies are large enough to rival certain sovereign states. For example, the GDP of California alone is equal to that of the United Kingdom’s7.

Historically, the correlation of US municipal bonds to other major asset classes is relatively low. Correlation is a measure of how the prices of two assets move relative to each other. The closer the coefficient is to 1, the more likely the two will rise and fall in tandem.

From January 1997 to September 2021, the correlation of US municipal bonds to investment-grade bonds was 0.68. Over the same time period, the correlation of US municipal bonds to US Treasures was 0.52, while that of US municipal bonds to the S&P 500 Index was just 0.028. A lower correlation can help investors mitigate the volatility of their overall portfolio, especially during market turbulence.


BNY Mellon US Municipal Infrastructure Debt Fund: Invest in a world that quests for income

BNY Mellon Investment Management has been providing thematic investment plans for investors since 2011. Their unique investment process can efficiently tap into investment concepts that provide long-term growth.

Launched in 2017, the BNY Mellon US Municipal Infrastructure Debt Fund is one of the first products to invest predominately in taxable and tax-exempt infrastructure-focused US municipal bonds. 

BNY Mellon’s experienced team comprehensively examines factors such as the health of the local economy, population and debt profile of the issuing state to generate returns for investors.

The company focuses on five major themes, namely climate change, aging infrastructure, scarcity of natural resources, demographic shifts and governance risks.

Through a process of active management, BNY Mellon’s team closely monitors ever-changing market conditions with the aim of providing investors with a balanced bond and yield profile, while at the same time ensuring that the Fund will not deviate from its core objectives and risk parameters.

What you should know about BNY Mellon US Municipal Infrastructure Debt Fund before investing:

  • The Fund invests primarily in municipal bonds, which are issued by a state, municipality, not-for-profit corporate issuers of United States to finance infrastructure sectors and projects conducted in the United States of America
  • The Fund’s investment portfolio may fall in value and there is no guarantee of the repayment of principal.
  • Adverse economic, political or regulatory changes or adverse factors could result in adverse changes which can significantly affect the revenue generated and the overall market. This may lead to defaults on payment of principal or interest of the municipal bonds. The federal government of the United States are not obliged to support any municipal bonds in default. The Fund could suffer substantial loss.
  • Municipal bond markets may not be liquid and quoted prices for the same bond may materially differ. The market is generally subject to a lesser degree of transparency which may possibly lead to higher trading costs for the Fund. Municipal bonds may also be subject to call and/or prepayment risk.
  • There are specific risks associated with certain municipal sectors that the Fund may invest, including general obligation bonds risk, revenue bonds risk, private activity bonds risk, moral obligation bonds risk, municipal notes risk and municipal lease obligations risk.
  • The Fund is exposed to risks associated with debt securities, including credit risk, interest rate and inflation risk, downgrading risk, credit rating risk and sub-investment grade debt securities risk.
  • The Fund‘s investments are concentrated in United States and may be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the United States.
  • The Fund may pay dividend effectively out of capital which amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment. Any such distributions may result in an immediate reduction of Net Asset Value per share.
  • The Fund may use derivatives for efficient portfolio management (EPM) and investment purpose which may be volatile, involve special risks such as risk of disproportionate loss due to leverage, counterparty/ credit risk, liquidity risk, valuation risk over-the-counter risk which could lead to a high risk of significant loss.
  • Investors should not rely solely on this document to make investment decision. Please read the offering documents carefully for further details including risk factors.

Learn more about the BNY Mellon US Municipal Infrastructure Debt Fund today.


1 Insight Investment as at October 2021

2 Source: SIFMA as at Jun 30, 2021

3 Source: Forbes as at Nov 9, 2021

4 Source: Municipal Market Data (MMD), FRED, Bloomberg, Insight as at Sep 30, 2021. For illustration purpose only.

5 Source: Barclays, Thomson Reuters, Insight as at Sep 30, 2021. Municipal bonds: Bloomberg Municipal Bond Index. For illustration purpose only.

6 Source: Municipal Market Data (MMD), FRED, Bloomberg, Insight as at Sep 30, 2021. For illustration purpose only. Municipal bonds: Bloomberg Municipal Bond Index. For illustration purpose only.

7 Source: Bureau of Economic Analysis (BEA) and International Monetary Fund as at Dec 31, 2020.

8 Source: Bloomberg, Barclays, Merrill Lynch as at Sep 30, 2021. *Correlation matrix based on total returns, since Jan 1, 1997


BNY Mellon US Municipal Infrastructure Debt Fund (the “Fund”) aims to provide as high a level of income as is consistent with the preservation of capital. This is not a capital guaranteed fund and there is no guarantee of the repayment of principal.

This Fund is a sub-fund under BNY Mellon Global Funds, plc (the “Responsible Person”), which is an openended umbrella investment company with variable capital incorporated in Ireland with segregated liability between sub-funds and authorised by the Central Bank of Ireland. The Fund is recognised for retail distribution in Singapore under Section 287 of the Securities and Futures Act 2001. The Responsible Person has appointed BNY Mellon Investment Management Singapore Pte. Limited (“BNYM-IM-SG”) as its Singapore Representative. The prospectus in relation to the Fund is available and a copy of it may be obtained from or at BNYM-IM-SG’s distributors. A potential investor should read the prospectus before deciding whether to subscribe or purchase units in the Fund. The value of the units in the Fund and the income accruing to the units, if any, may fall or rise. The net asset value of the Fund is likely to have a high volatility due to its investment policies or portfolio management techniques. This document shall be used in Singapore only and shall not be used for the purpose of an offer or solicitation in any other jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. All information herein is made for information purposes only and subject to change at any time without notice, and should not be construed as investment advice or recommendation. Investors should seek relevant professional/financial advice before investing in the Fund and should read this document in conjunction with the prospectus of the Fund. The Responsible Person, BNYM–IM-SG and its affiliates are not responsible for any advice given to investors. Investments involve risks. A complete description of risk factors is set out in the Prospectus. Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed. The Fund may invest in financial derivatives. When you sell your investment you may get back less than you originally invested. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Issued by BNYM-IM-SG (Co. Reg. No. 201230427E)

AP3945-04-07-2022 (3M)

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