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Today Is Good Entry Point for High-Yield Munis

Investors with a higher risk tolerance can obtain better-than-average rewards with high-yield munis, according to Franklin Templeton's Rafael Costas.

Miriam Sjoblom: Defaults so far have been mostly confined to the high-yield portion of the market, and you expect there could be more trouble there to come. Franklin has a high-yield muni fund. It's one of Morningstar's Analyst Picks, and we like the approach there. It's a bit different from others in the category. Can you talk a little bit about the opportunities and dangers in high yield and a bit about the approach in that fund?

Rafael Costas: Sure. Well, we manage all of our funds in the same office, with the same team and the same staff of portfolio managers and research analysts. Of course, in the high-yield fund you're going to pay even more attention to it from the research side. It happens to be a pretty high-quality high-yield fund. It's been. so for the last few years, something that helped us in the performance year of 2008, when the overall market was down.