Bishop Street Hawaii Municipal Bond Fund Class A (BHIAX)

Overview

The referenced fund focuses on investing a significant portion of its assets in municipal bonds that are rated as investment grade, highlighting a strategy aimed at generating income exempt from both federal and Hawaii state taxes. This investment approach caters primarily to investors looking for tax-efficient income sources. Furthermore, the fund has the flexibility to invest in municipal bonds across various U.S. states, territories, and possessions, broadening its potential investment base. Despite this diversification in geography, the fund is classified as non-diversified, indicating a concentration in fewer investments which could increase volatility or risk. The policy to not limit the average maturity of the fund's portfolio suggests a flexible approach to duration management, possibly aiming to optimize returns in varying interest rate environments.

Products and Services

• Investment in Investment Grade Municipal Bonds

The core offering involves the allocation of at least 80% of the fund’s net assets into investment grade municipal bonds. These bonds are selected based on their high credit quality, aiming to offer investors a relatively stable and lower-risk income stream. The interest earned from these bonds is exempt from regular federal income taxes and Hawaii state income taxes, making them an attractive option for tax-averse investors, particularly those residing in Hawaii.

• Flexibility to Invest in Bonds from Various U.S. Jurisdictions

In addition to focusing on Hawaii, the fund has the discretion to invest in municipal bonds issued by other U.S. states, territories, and possessions. This strategy not only diversifies the geographic exposure of the fund's investments but also allows for the exploration of potential opportunities in different municipal bond markets across the country. This could potentially increase the fund's ability to maximize tax-exempt income for its investors.

• No Limit on Average Maturity

The fund does not restrict the average maturity of its bond portfolio, granting it the flexibility to invest in both short-term and long-term bonds. This strategy is crucial for adapting to changing interest rate environments, which can affect the value of fixed-income investments. By not limiting the average maturity, the fund's managers can dynamically adjust the portfolio to optimize returns or reduce risk as they see fit, tailoring the investment approach to current market conditions.

• Non-Diversified Fund Status

Although the fund takes a broad approach by investing in various U.S. territories, it maintains a non-diversified status. This means it may concentrate its investments in a smaller number of issuers or sectors compared to diversified funds. While this could lead to higher returns if those investments perform well, it also means increased risk, as the fund's performance will be more closely tied to the fortunes of fewer issuers.