The manager of the Oppenheimer Rochester National Municipals mutual fund, down a steep 7.8% so far this year, has reduced his fund’s exposure to one area that has hurt it badly this year: municipal airport authority bonds back by AMR Corp.’s American Airlines.

Airline-backed muni bonds have suffered this year, as the slow economy and terrorism fears have eaten into travel volume and raised the specter of bankruptcy filings by American and other carriers, The Wall Street Journal reports.

As of its Jan. 31 shareholder report, Oppenheimer Rochester National Municipals had about 21% of its $473 million in assets in airline-backed muni bonds. That included 14% of assets in bonds backed by American Airlines. As of March 31, airline bonds were 18% of assets, with 9.8% of these assets backed by American, fund manager Ron Fielding said.

With the fund now holding 4.8% of its assets in American Airline bonds, Fielding said he believes that is a "prudent risk," even though American’s financial condition is far more precarious than it was when he first invested in the bonds.

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