Principal Street High Income Municipal Fund (GSTAX): Q4 2019 Commentary


We closed out 2019 on yet another positive note, with Fund having benefited from the continuing backdrop of a strong fixed income market, an accommodative Federal Reserve, solid credit selections, and an increasing asset base. As a result, we close out the 4th quarter with the Fund demonstrating strong performance for both the quarter and for the year, all the while generating a very strong stream of federally tax-free income. The net result is that the Fund continues to achieve its stated goals of producing consistent monthly income and total return.

Consistency is a primary tenet for Principal Street, and this effort has translated well to the Fund in terms of both the distribution yield and total return. We continue to be please with our investment strategy, positioning in the market, credit selections, and the performance year-to-date. The operations of the Fund continue to run smoothly, the Fund is growing, and we have found new credits that we believe represent good value. The past year proved to be a very attractive time to own high yield tax-exempt securities, and our belief is that this favorable backdrop will continue for 2020. Indeed, the macroeconomic backdrop is largely positive — certainly regarding inflation and the direction of rates, and the credit fundamentals of both the Fund and the asset class remain strong. We also believe that the Fund’s attributes — higher yields, the potential for capital appreciation, diversification, its low correlation to other asset classes, and its strong relative value in the fixed income universe — make it an attractive addition to many portfolios. This is consistent with our views since the inception of the Fund, and we discuss all of this in more detail below.

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