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BlackRock's muni bond maven sees opportunity everywhere but Puerto Rico

BlackRock signage above building entrance in New York.
Scott Mlyn | CNBC
BlackRock signage above building entrance in New York.

Big challenges still lie ahead for many debt-stricken municipalities, including Detroit, Stockton and Puerto Rico.

But overall, the municipal bond market, $3.7 trillion and counting, managed to outperform nearly all other asset classes in 2014, including U.S. equities, treasuries, investment-grade and high-yield corporate bonds.

Read MoreChina's muni bond market set for takeoff

So what lies ahead after last year's stellar performance?

According to Peter Hayes, head of the $116 billion municipal bond group at BlackRock, the outlook remains bright, provided you rein in expectations.

Hayes told CNBC's "Power Lunch" Thursday "Those outsize returns of 2014 are a thing of the past, particularly in a rising rate environment. It is simply not in the cards. We'll get just fraction of the returns we saw last year

Investors shouldn't expect smooth sailing either. "While the road ahead looks positive," said Hayes, "I anticipate quite a bit of volatility along the way. "

One region Hayes is avoiding is Puerto Rico, which has been floundering under the weight of $72 billion in government and agency debt for over a year.

Read MorePuerto Rico bonds a good bet? Jeffrey Gundlach says yes

"In the Commonwealth, you are taking on emerging market-like debt, so you better be very comfortable with the volatility that comes with that."

Bottom line?

"No matter how you slice it," Hayes said, "We think Puerto Rico's problems will have a much wider negative impact on the municipality markets than previously thought "