Are You Unknowingly Investing In High Risk Bonds from Puerto Rico?
State Treasurer John Kennedy says Louisiana investors who use mutual funds for long-terming savings should look more closely at their portfolios.
"Mutual funds and individual investors have been buying these bonds because they are listed as traditionally safe 'municipal debt,' which is exempt from federal and sometimes state and local taxes, and because Puerto Rico debt pays higher yields than other municipal bonds. But I worry about their safety."
A press release from Kennedy's office states, "The instability of Puerto Rico's economy, coupled with a credit rating one step above "junk," makes investing in the island a shaky proposition. In addition to suffering from a stagnant economy, Puerto Rico has a history of enacting policies like issuing debt to pay off short-term deficits and maintaining high unfunded pension liabilities."
Kennedy's office says the Secretary of State in Massachusetts began investigating mutual fund companies to find out whether they had adequately disclosed the all the risks involved in investing in bond from Puerto Rico. But there office was not the only one to begin investigating, as the Securities and Exchange Commission has also started investigating.
"Most investors buy municipal bonds because they are looking for a safe bet. Most investors also buy municipal bonds through a mutual fund, which owns hundreds of stocks and bonds. It can be very hard to know where your money is going. Louisiana investors need to know if they are holding Puerto Rico bonds. Otherwise, they could be unwittingly putting their hard-earned money at risk."