NEW YORK (The Deal) -- The investment objective of Eaton Vance's (EV) Georgia Municipal Income Fund is "to provide current income exempt from regular federal income tax and Georgia state personal income tax," according to its investment prospectus.
So it might be surprising to a few Georgia residents that roughly 5% of the fund's $60 million in assets, or slightly more than $3 million, are invested in debt issued by Puerto Rico, according to the most recent filings, which list holdings though Feb. 28. That might be less concerning if Puerto Rico were not potentially a few weeks away from default, in the view of many watchers.
In fact, even Bill Delahunty, Eaton Vance's muni research director, calls a Puerto Rican default "a high probability at this point. If you read their latest disclosure which came out in early May there were significant risk factors in there which clearly stated that if they do not get additional liquidity in one form or another, whether it's through a bond deal or a tax revenue anticipation note by mid to late summer there could be a debt moratorium and there could be a government shutdown, so I don't think that's surprising to the market at all."
But Eaton Vance feels comfortable with the risk in its portfolio, and has sizeable Puerto Rican bond allocations in many muni funds, including ones intended for residents of Maryland, Missouri, North Carolina, Oregon, South Carolina and Virginia, according to regulatory filings.