Investing in charter school municipal bonds may not be a topic that’s top of mind for all investors, but according to Nuveen, it’s an area that could present a big opportunity. Charter schools are a small fraction of the education municipal bond market, but with increasing demand for these schools, there is expected to be a strong supply of bonds available. Dan Close, Nuveen’s head of municipals and lead portfolio manager for high-yield municipal strategies, points out that charter school bonds can offer a tax-equivalent yield of nearly 8% for investors in the highest tax bracket.
At Extreme Investor Network, we believe that understanding niche investment opportunities is key to building a well-rounded portfolio. Charter school bonds fund construction, renovation, or the purchase of school facilities, and the interest on these bonds is exempt from federal tax, with some also being free of state taxes. The pandemic and legislation supporting school choice have accelerated demand for charter schools, with over 8,000 charter schools serving 3.7 million students in the US.
While traditional K-12 public schools have seen a decline in enrollment, charter schools have experienced growth. Within the $580 billion K-12 education municipal bond sector, charter schools make up about $33 billion. Close predicts an increase in issuance in 2025, providing a unique opportunity for investors, especially considering the higher yield potential of charter school bonds compared to traditional K-12 bonds.
It’s important for investors to do their due diligence when considering investing in charter school bonds. Nuveen has a team of analysts dedicated to identifying successful charter schools based on factors such as location, academic performance, curriculum, fiscal management, and legal provisions. By investing in early-stage charter schools, investors can potentially benefit from credit improvement as the schools grow.
Some of the charter schools held in Nuveen’s High Yield Municipal Bond Fund include The Academy Charter School in Hempstead, New York; Norton Science and Language Academy in San Bernardino, California; and Community of Peace Academy in St. Paul, Minnesota. These schools exemplify the kind of criteria Nuveen looks for in successful charter school investments.
At Extreme Investor Network, we believe in providing our readers with unique insights into investment opportunities that may not be widely known. By exploring niche markets like charter school municipal bonds, investors can potentially diversify their portfolios and capture attractive yields. Stay informed and stay ahead of the curve with Extreme Investor Network.