By: Clark Wagner, President, Foresters Investment Management Company, Inc. and Chief Investment Officer, Foresters Financial and Patrick Tucci, co-Portfolio Manager, First Investors Tax Exempt Funds
As the entire nation watched, Texas and Florida were recently battered by recordbreaking winds and inundated with floodwaters that stretched for miles inland, the result of back-to-back hurricanes Harvey and Irma.
Here at Foresters Financial, our thoughts are with all of the residents, families, and communities in the areas affected, whether by power loss, displacement from their homes or jobs, or loss of either. Clients with investments through the First Investors Tax Exempt Funds in these impacted locations, can rest assured that these investments are being monitored carefully now and as the recovery progresses.
Despite the vastness of the affected zones, most First Investors Tax-Exempt Funds’ holdings in Florida and Texas are not geographically located within the affected areas. The Funds do have some exposure but we believe that the likelihood of a debt service payment disruption on the bonds we hold is minimal.
In particular, the Funds do hold some bonds geographically located in the greater Houston area—such as Houston Utility System (Aa2/ AA rated). As of this writing, the First Investors Funds Team is diligently working to assess any impact. The total exposure to Houston Utility System is less than 1% in the Tax Exempt Income Fund and less than 2% in the Tax Exempt Opportunities Fund. We do not expect any negative long-term impact. All other bonds held by the Funds in the affected Texas regions are either insured or have a credit enhancement. This means that a bond guarantee program is in place to pay any deficiency caused by the default of a bond participant affected by the hurricane. During the next several days, we expect to be able to reach the appropriate parties in the affected areas to obtain more clarity.
In Florida, First Investors Tax Exempt Income Fund and First Investors Tax Exempt Opportunities Fund each holds bonds for both Fort Lauderdale and Fort Myers airports (this represents less than 2% of each fund). Both airports were shuttered during the most severe period of the storms. Subsequently, Fort Lauderdale resumed flights on Tuesday (9/12/2017) and Fort Myers on Wednesday (9/13/2017). Disruption to revenue supporting the bonds is expected to be minimal.