Aberdeen Closed-End Funds
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Aberdeen Closed-End Funds
abrdn National Municipal Income Fund (VFL), featuring Portfolio Manager Miguel Laranjeiro
Mike Taggart interviews Miguel Laranjeiro, Portfolio Manager for VFL, about the current marketplace and outlook for municipal bonds.
abrdn National Municipal Income Fund (VFL)
Podcast Transcript
November 2025
Mike Taggart: Welcome to the latest podcast for the Aberdeen National Municipal Income Fund, ticker symbol VFL. I'm Mike Taggart, Aberdeen's Head of Closed-end Fund Investor Relations with me is Miguel Laranjeiro, a Portfolio Manager for VFL. Miguel, thank you for joining us today.
Miguel Laranjeiro: Thanks, Mike. Always happy to talk communities with yourself and investors.
Mike Taggart: Miguel, all year there's been a lot of noise coming out of Washington DC. But how has the year been on the municipal front, the states and local municipalities funding the credits this fund invests in?
Miguel Laranjeiro: Well, it hasn't stopped them from issuing debt, that's for sure. We are very close to record-setting levels. By the, I'm sure we will set a new record in terms of issuance. That is on the back of record setting year in 2024.And expectations for 2026 is that we will eclipse these record setting, amounts of issuances. So we saw a ton of issuance, a lot of activities, especially prior to the tax legislation that was passed in June. There was a lot of pull forward issuance. So, with that, that creates a lot of opportunities for active investors. So, it was definitely, a time to be active, the time to take advantage of high elevated income rates. It was good year for income focused investors, for sure.
Mike Taggart And the tax receipts, have they been holding up as well? Across states and the locals? Yeah.
Miguel Laranjeiro: Overall tax collections are up 3 to 5% depending on, geographic area. Whether it's income state, sales tax, property taxes from the fundamental point of view, credit wise, the municipal markets in pretty good place, distressed in default levels are relatively low. So yeah. Very, steady as she goes so far this year.
Mike Taggart: Now, interest rates also obviously play a large role in the valuation of all bonds and including municipal bonds. The Federal Reserve has resumed its rate cutting cycle. So how is that played out in the markets, and has that helped the fund at all?
Miguel Laranjeiro: Yeah. So the fund is set up as a longer duration fund. It's been a tough year for total return in the long duration, part of the curve, we utilized the lag in underperformance. And the long end as an opportunity to clip the historically elevated levels of income, especially for high quality issuers, you'll find in the sell off during the, tariff tantrum in, in April, there were Double-A issuers at levels that I haven't seen since. Really, since Covid. And if you go beyond that, seen those kind of income levels in ten, 20 years, so historically attractive opportunities for income focused investors, whether you're on the short end or the long end of the curve, being that we're on the long end of the curve, it was good time to lock in yields for for a long period of time.
And we think that portends well for the future with respect to total returns.
Mike Taggart: And then the fund also utilizes leverage. So you know how to lower rates kind of help with that.
Miguel Laranjeiro: So leverage has come down significantly from this time last year. Leverage costs down 75 to 100 basis points from where we were last year. I would anticipate with the fed continuing their accommodative path and into 26, leverage costs will continue to come down. That should benefit, higher leveraged vehicles as the discrepancy between long and yields and leverage rates widens, that should be constructive for long duration, high levered vehicles. So that should bode well for the fund.
Mike Taggart: And then there are various segments or sectors of the municipal market. So two part question here to keep things fair and balanced. First, in which sectors have you been facing the strongest headwinds. And do you expect that to change. And then second, where are you finding the most attractive opportunities. And do you expect that to change.
Miguel Laranjeiro: So strongest headwinds has been project related finance, specifically for unproven projects. So projects in mass transportation in areas that are not used to mass transportation. So just a completely new build, those project related, financing bonds have have been struggling in terms of performance. In addition to that, we've seen a underperformance in tobacco that is largely due to duration underperforming tobacco tends to be a high beta name. As long duration underperformed you'll find tobacco will underperform with it. Lastly, general obligation bonds. This view is a little bit nuanced. More so general obligation bonds that of experienced outmigration patterns. So you'll see that in places like Chicago and Puerto Rico, where population flow has been negative over the last 5 to 10 years.
We're starting to see the effects of that in terms of rising pension costs and rising debt burden on the remaining citizens. And that's been been a struggle to those credits.
Mike Taggart: They're having a hard time paying the credit, meeting their obligation.
Miguel Laranjeiro: Yeah. So in in the, in general obligation example, there is those cities or municipalities have rising debt burdens and a lower population base to pay those debt burden. So we see that as a headwind going forward. It's been a headwind so far. And we see that continuing into 2026, unless there's a dramatic reversal in population demographics. But those things typically take a long time to play out, five, ten years, sometimes even more than that.
On the on the other side of the coin, things that have played well, housing has done really well this year. Housing for its credit quality, typically double AA and a rated projects, with the backing of either Fannie Mae or some state sponsored program. So these are generally very high quality assets. There's been a lot of issuance in terms of housing because, you know, states are looking to build out affordable housing and housing capacity in general. So with that, we've seen elevated income rates offered to bondholders. So we think it makes for and that well, it has made for an attractive relative value opportunity for those looking to invest in and highly rated issues with with positive income demographics.
Another, another sector that we like and been constructive on is continuing care and retirement communities. This is usually a bit of a lower grade sector. You'll find these are either falling in high yield or low investment grade. This is typically senior living facilities for high net worth elderly they buy into the project. But as we've seen across the country, the average age, of this country is growing at, expeditious pace. We're seeing baby boomers age into retirement age, and we're seeing a lot of demand for those types of projects. We think the fundamentals of this sector are attractive going forward. And we think the relative value being what what you're getting paid, in order to invest in those projects is relatively attractive now and into the future.
So those are a couple of sectors that we have liked and continue to like going forward.
Mike Taggart: And finally, what are your views as to where the municipal market goes from here?
Miguel Laranjeiro: I think, going into the next year, we see issuance continuing to run rampant. As I said earlier, we we are on pace to eclipse, last year's record setting pace in terms of issuance. I anticipate 2026 will eclipse this year. We're seeing a ton of projects in terms of infrastructure. The federal government is focused on building out infrastructure, state and local government to focus on building out infrastructure. And that's going to lead to, higher demand for debt.
So, the infrastructure, by and large, 75% of infrastructure done in the United States is done through the municipal bond market. So as the country expands its desire to build out its infrastructure, we think that expands the size of the market itself.
So I'm calling for uptick in issuance, which we're an active managers. Great. You get a lot of opportunity to add income to your, to your portfolio. We do like, high yield. However, I bifurcate it between the lower end and the higher end of high yield, higher end of high yield still looks relatively attractive given the fundamentals of the economy. Lower end. For us, the juice is not worth the squeeze. We are starting to see a few lower end issuers start to struggle. So we're staying out of the lower end of the high yield spectrum. We still like long duration relative to, to the intermediate duration, especially in an accommodative, fed path. We think long duration plays well, especially in the municipal bond market, where it looks relatively attractive to the corporates. You know, historically speaking.
Mike Taggart: Excellent. Well, thank you very much, Miguel, for taking the time to give us that informative update. Really appreciate it.
Miguel Laranjeiro: No problem. Thanks, Mike.
Mike Taggart: There are three convenient ways to learn more about VFL. Visit its website abrdnvfl.com. Second, you can email us at InvestorRelations@aberdeenplc.com or give us a call at 1-800-522-5465.
I'm Mike Taggart of Aberdeen. Thank you for listening.
This podcast is provided for general information only and assumes a certain level of knowledge of financial markets. It is provided for informational purposes only and should not be considered as an offer, investment, recommendation or solicitation to deal in any of the investments or products mentioned herein and does not constitute investment research. The views in this podcast are those of the contributors at the time of publication, and do not necessarily reflect those of Aberdeen.
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