The $460 million Franklin Double Tax-Free Income (MUTF:FPRTX) has lost more than 13% year to date - 30% from May to September this year. This is due to its excessive concentration in Puerto Rico bonds. FPRTX reportedly has 60% or more of its portfolio holdings in Puerto Rican bonds. The Puerto Rican economy is struggling and its bond market is suffering disproportionately to other geographic areas. The S&P Municipal Bond Puerto Rico Index is down over 21% year to date whereas the S&P Municipal Bond Index is only down 2% year to date, a 19% difference!
There have been reports of possible defaults and broad-sweeping ratings down-grades which will cripple the local government's ability to raise capital and cause a further slide in Puerto Rico debt and funds owning that debt. Whether those dark predictions come to be true, it is clear that the Puerto Rican bond market is not going to recover anytime soon. And so, investors in the Franklin Double Tax-Free Income Fund are just going to have to wait it out and hope and pray that the Puerto Rican economy does not collapse. There is no hope for reorganization of Puerto Rican debt under the bankruptcy laws. Unless the economy improves, the value of Puerto Rican bonds is heading in the direction of zero!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.