Municipal bonds and direct lending have reciprocal virtues when it comes to income yield, duration, inflation sensitivity and tax treatment, making the two assets natural complements or diversifiers in a total portfolio.
Blending munis with direct lending may enable several key diversification benefits, potentially increasing portfolio income and total return while reducing volatility.
By observing proper asset location guidance for the direct lending allocation, investors can mitigate the asset’s natural tax inefficiency to achieve superior after-tax returns.
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