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MFS Investment Grade Municipal Trust
MFS Investment Grade Municipal Trust (CXH) — a Boston-based closed-end fund using leverage to generate tax-exempt income from long-term municipal bonds.
MFS Investment Grade Municipal Trust
Launched by MFS Investment Management, the MFS Investment Grade Municipal Trust operates as a closed-end fund on the New York Stock Exchange under the ticker CXH. The vehicle is designed for long-term investors seeking federal tax-exempt income, sourcing its assets from a single mutual fund affiliate: MFS Municipal High Income Fund. This structure allows the trust to pursue a higher distribution rate than its underlying fund by layering a moderate amount of leverage, a common but distinctive feature of closed-end municipal funds. The fund's investment strategy centers on high-quality municipal bonds, predominantly rated investment grade, with a deliberate tilt toward revenue bonds over general obligations. The portfolio manager, Jason Kosty, and a 10-person dedicated municipal bond team target essential-service sectors historically resilient across credit cycles — water and sewer utilities, toll roads, mass transit systems, and acute-care hospitals. The trust's top sector exposures reflect this, with major holdings across healthcare, transportation, and public infrastructure. Geographically, the trust's municipal credits span all 50 states, Puerto Rico, and other US territories, with a pronounced overweight in revenue-rich jurisdictions like California, Texas, and New York. MFS Investment Management, the trust's sponsor and advisor, is one of the oldest asset managers in the United States, founded in 1924 and headquartered in Boston's Back Bay. The firm oversaw more than $600 billion in assets under management as of year-end 2024 (per MFS, 2025). The trust's investment team draws on a research platform of roughly 40 dedicated municipal credit analysts who evaluate securities based on fundamental credit analysis and relative value, rather than chasing rating-agency designations. The trust's use of leverage — maintained at a regulated 30-38% of total assets as of its most recent annual report — is deployed through floating-rate notes or preferred shares to capture the spread between long-term municipal yields and short-term borrowing costs. The trust's structural difference lies in its closed-end architecture, which allows it to remain fully invested during market dislocations without facing the forced-selling pressures open-end mutual funds encounter during redemption spikes. The portfolio's leverage creates a permanent capital base, letting Kosty harvest an illiquidity premium within the municipal bond market. As insider ownership data shows, trustees and officers collectively hold shares alongside public unitholders, reinforcing a governance alignment that extends to the fund's renewal structure — shareholders vote periodically on the continuation of the management agreement, preserving a check on fees and strategy.
General information
Firm type
Asset Manager
Year founded
—
AUM
Undisclosed
Location
Region
North America
Country
United States
City
Boston
Corporate office
Boston, MA, United States
Principals
Michael W. Roberge
Chief Executive Officer
Carol Geremia
President
Jason Kosty
Portfolio Manager
Sector focus
Frequently asked questions
How is the MFS Investment Grade Municipal Trust different from a traditional open-end municipal bond fund?
Unlike an open-end fund, it is a closed-end fund that trades on the New York Stock Exchange with a fixed number of shares. This structure allows the portfolio manager to use leverage to enhance tax-exempt income and stay fully invested during market selloffs without worrying about investor redemptions. The trust can also trade at a premium or discount to its net asset value, creating potential for total return strategies beyond yield alone.
What kind of leverage does the trust use, and how does it affect risk?
The trust typically uses floating-rate preferred shares or tender option bonds to maintain leverage between 30% and 38% of total assets. This leverage amplifies both the tax-exempt income distributed to shareholders and the volatility of the fund's net asset value. In a rising short-term interest-rate environment, the cost of that leverage can compress the spread the fund earns, reducing distributable income.
Who runs the municipal bond portfolio inside the trust?
Jason Kosty serves as the portfolio manager, overseeing an 11-member municipal bond team at MFS. Kosty and his team are responsible for credit selection, sector allocation, and duration positioning across the trust's roughly 700 municipal bond holdings. The team is supported by a larger MFS municipal credit research department of approximately 40 analysts.
What types of municipal bonds does the trust actually own?
The portfolio concentrates on investment-grade municipal bonds, with a strong bias toward essential-service revenue bonds — water and sewer authorities, toll roads, airports, hospitals, and public power utilities. While termed 'high income' in its underlying fund's name, the trust's holdings are overwhelmingly investment-grade, with high-yield exposure historically capped at roughly one-third of assets.
Does the trust participate in direct loans or private placements, or only in publicly traded municipal bonds?
The trust invests exclusively in publicly traded municipal bonds, not in direct loans to municipalities or private placements. The closed-end structure does give the manager flexibility to buy less-liquid, smaller issuance bonds that an open-end fund might avoid, but the universe remains within the public municipal bond market.
What is the relationship between MFS Investment Grade Municipal Trust and MFS Investment Management?
The trust is a registered closed-end fund sponsored and advised by MFS Investment Management, which is one of the oldest US asset managers, founded in 1924. The trust invests all of its assets in the MFS Municipal High Income Fund, another MFS-managed open-end vehicle, effectively offering a levered share class of that strategy. MFS Investment Management is itself a subsidiary of Sun Life Financial, the Canadian insurance company.
How is the trust's income taxed, and who is the target investor?
The trust's distributions are generally exempt from federal income tax, making it most suitable for US taxpayers in high marginal tax brackets holding the fund in taxable accounts. A portion of income may be subject to state income tax and, occasionally, the alternative minimum tax depending on the underlying bond holdings. The target investor is an individual seeking a stable, tax-advantaged income stream, often in or near retirement.
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