Ivy Funds has introduced the Ivy Municipal High Income Fund, to be managed by Michael Walls, who has been with the firm for the past 10 years.

“We believe that the tax relief potential, coupled with the income potential that accompanies higher-yielding municipal bonds, makes this category an attractive one for investors building a diversified portfolio,” said Thomas W. Butch, president and CEO of Ivy Funds Distributor.

In selecting investments for the fund, Walls said, he studies the macro-economic environment and credit risk associated with issuers. “We also look at interest risk and call risk as we attempt to maximize the potential reward for a given level of risk,” he said.

Ivy Funds also noted that municipal bonds have structural characteristics that are different from other types of fixed income securities, and respond differently to changes in market conditions, such as changes in credit quality and interest rate policy—which help to reduce a portfolio’s volatility if properly diversified. Also, because the credit rating of municipalities is lower than the federal government, municipal bonds have a capacity to deliver higher yields.