Personal Finance

These funds have the most exposure to Puerto Rico debt

Key Points
  • The prospects for Puerto Rico bondholders to recover their money has "dwindled," according to one Columbia Threadneedle Investments executive.
  • Certain firms and funds have more exposure to the devastated island's debt, according to data from Morningstar Direct.
Sneakers hang from downed wires in the wake of Hurricane Maria in the Vietnam section of Guaynabo, Puerto Rico on October 1, 2017.
Nick Brown | Reuters

Investors would be wise to keep an eye on funds that have the most exposure to Puerto Rico debt as the island faces unprecedented devastation from Hurricane Maria.

Puerto Rico had already racked up more than $70 billion in debt before the storm. And with a new request for $1.4 billion in federal aid from Gov. Ricardo Rossello, the island's shortfall doesn't look like it will end any time soon.

The situation led one Columbia Threadneedle Investments executive to declare that the possibility that Puerto Rico bondholders will recover all their money has "dwindled" in a blog post Monday.

Puerto Rico about 'survival' right now: Orlando Bravo

"Long before Hurricane Maria, we believed that Puerto Rico bondholders should expect significant losses," wrote Chad Farrington, head of municipal bond credit research and senior portfolio manager at Columbia Threadneedle. "Now, the economic outlook is further weakened by the effects of the hurricane."

Firms with the most PR debt exposure

FirmTotal Puerto Rico debt
OppenheimerFunds $2,955,781,628.00
Franklin Templeton Investments $1,142,020,099.00
MFS $676,144,062.00
MainStay $554,738,801.00
Goldman Sachs $511,618,471.00
American Funds $212,453,233.00
Eaton Vance $191,457,544.00
Lord Abbett $149,579,023.00
Vanguard $123,634,227.00
BlackRock $110,219,411.00

That prediction comes as the island's revenues that are diverted to help with rebuilding efforts could reduce the likelihood bondholders will recover their funds, according to Farrington. In addition, the island's population could shrink if a trend toward migration elsewhere accelerates due to slow recovery efforts, he said.

Puerto Rico's debt made headlines last week, as President Donald Trump called for the island's debt to be "wiped out." The president's comments prompted Puerto Rico's general obligation bonds to drop to 37 cents on the dollar.

Trump can't magically wipe away Puerto Rico's debt, but his words can make bonds worth a lot less

The majority of those bonds are held by individual investors, Cate Long, founder of research organization Puerto Rico Clearinghouse, said in an interview. Investors piled into the debt amid a hunt for bigger returns and the prospect of reduced taxes on their gains; the interest on Puerto Rico's debt generally does not require investors to pay local, state or federal taxes.

As a result, experts point out that investors should be vigilant about investigating whether they own Puerto Rico debt and, if they do, how much they own.

Funds with the most Puerto Rico debt exposure

FundNameFund Weighting in Puerto Rico debtMarket Value of Puerto Rico DebtFund
Oppenheimer Rochester MD Municipal Fund22.40% $6,946,788.00 $30,947,106.00
Oppenheimer Rochester VA Municipal Fund20.20% $15,032,633.00 $74,412,635.00
Oppenheimer Rochester ShrtDur HY Muni Fd18.20% $273,351,491.00 $1,497,842,170.00
Oppenheimer Rochester Fund Munis Fd17.70% $1,020,903,948.00 $5,776,883,928.00
Oppenheimer Rochester AZ Municipal Fund17.30% $5,345,365.00 $30,824,918.00
Oppenheimer Rochester NJ Municipal Fund17.20% $58,499,903.00 $340,386,019.00
Oppenheimer Rochester AMT-Free NYMuniFd14.80% $160,136,611.00 $1,084,433,216.00
Oppenheimer Rochester Ltd TermNYMunisFd14.30% $321,597,151.00 $2,241,408,809.00
Oppenheimer Rochester NC Municipal Fund13.10% $7,473,483.00 $57,137,280.00
Oppenheimer Rochester PA Municipal Fund12.40% $94,154,901.00 $760,119,144.00
Oppenheimer Rochester MA Municipal Fund12.00% $5,118,685.00 $42,749,944.00
Oppenheimer Rochester Ohio Muni Fund11.30% $6,930,380.00 $61,535,903.00
Transamerica High Yield Muni10.20% $10,581,341.00 $103,589,832.00
Oppenheimer Rochester High Yld Muni Fd9.90% $580,030,141.00 $5,843,386,533.00
MainStay High Yield Municipal Bond Fund9.10% $299,523,091.00 $3,278,567,545.00
Eaton Vance OR Municipal Income Fund9.10% $10,679,066.00 $117,716,211.00
Oppenheimer Rochester AMT-Free Munis Fd8.80% $182,229,147.00 $2,080,442,951.00
Oppenheimer Rochester Michigan Muni Fd8.40% $2,972,680.00 $35,264,327.00
Oppenheimer Rochester CA Municipal Fund8.10% $112,442,550.00 $1,381,435,859.00
Eaton Vance MO Municipal Income Fund8.10% $5,182,465.00 $64,130,464.00
Oppenheimer Rochester Ltd Term CAMuniFd8.00% $44,635,841.00 $559,078,436.00
SPDR Nuveen S&P High Yield Muni Bd ETF7.80% $48,270,524.00 $622,403,153.00
MainStay Tax Free Bond Fund7.70% $207,929,662.00 $2,688,113,343.00
MFS Municipal High Income Fund7.00% $276,838,252.00 $3,978,791,666.00
MFS Maryland Municipal Bond Fund6.70% $6,051,438.00 $89,866,556.00