Franklin Double-Tax Free Income Fund Puerto Rico Bond Losses

The Puerto Rican bond fund market performance has not only impacted the island’s economy but has also adversely impacted the American bond market. The issuer has experienced losses in value following controversy over bond funds. The S&P Municipal Bond Puerto Rico Index decreased 16.3 percent in 2013 so far. Puerto Rico has accumulated $70 billion in outstanding debt and the numbers are still growing.

Unfortunately, the Franklin Double Tax-Free Fund holds about 65 percent of its net assets in Puerto Rican municipal bonds. Since July 2012, the municipal bond fund declined in assets to $461.2 million from nearly $900 million it initially held. Out of the top ten holdings in the Franklin Double-Tax Free Income Fund, Puerto Rico bond funds account for six, holding the third through eighth spots. The fund has it’s the highest amount of Puerto Rican municipal bond debt in the US bond market.

Its heavy weight in Puerto Rico bonds has factored in the fund’s horrific performance. The Franklin Double Tax-Free Fund has lost 14 percent so far this year. Morningstar reported the Franklin California Tax-Free Income Fund suffered a decline 6.13 percent of its value during a five month period ending October 1st. The Franklin California Tax-Free Income Fund holds about 5 percent in Puerto Rico bonds.

Puerto Rico bond funds appealed to many investors because of their tax-exempt interest. The islands debt is not obligated to pay federal, state or local taxes on any interest earned regardless of the residence of the investor. If you lost money in Franklin Double-Tax Free Income or a UBS related Puerto Rico bonds If you lost money in the Franklin Double-Tax Free Income Fund or in UBS related Puerto Rican Bonds please call us to learn about securities arbitration claims.

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