The Municipal Bond Revolution: How SMAs Are Reshaping a $4 Trillion Market

At the heart of this revolution is the explosive growth of Separately Managed Accounts (SMAs), which have surged from just $100 billion in assets in 2008 to an estimated $1.2 trillion by 2025. That’s nearly 30% of the entire $4 trillion municipal bond market, signaling a profound shift in investor preferences and industry practices.

What’s Fueling the SMA Boom?

1. Radical Transparency and Control
Unlike traditional mutual funds, SMAs empower investors with a granular and transparent view of their portfolios. Every bond, every issuer, every maturity date is visible—nothing is shrouded in pooled obscurity. This level of transparency matters, especially for high-net-worth and ultra-high-net-worth investors seeking to understand and manage credit exposure, tax liability, and ESG (Environmental, Social, Governance) considerations with precision.

2. Customization at Scale
Municipal SMAs can be hyper-customized. Want to avoid tobacco settlement bonds? Require bonds only from states with favorable tax rules for your clients? SMAs deliver. This is meaningful flexibility that fund structures cannot match, especially for clients with unique social, environmental, or tax needs.

3. A Compelling Performance Edge
Municipal bonds are seeing robust inflows—18 of the past 20 weeks have been positive—and current yields are turning heads. With 10-year muni yields at 2.93% (about 71% of similarly-dated Treasury rates), tax-equivalent yields for high earners are exceptionally attractive. SMAs give managers the tools to capture and optimize these opportunities, often outperforming broad fund benchmarks through responsive, targeted management.

4. Democratization Through Technology
Perhaps most transformative is the technological leap that has democratized access to SMAs. Minimum investment thresholds have fallen to $250,000 at many firms. Direct indexing and sophisticated portfolio management systems—like IMTC’s platform—now make institutional-quality strategies available to a broader swath of clients. Automation, digitization, and workflow enhancements are no longer just buzzwords: they are enabling scale, accuracy, and interactivity in ways unimaginable a decade ago.

Market Checks and Competitive Insights

The numbers crystallize the new landscape:
Municipal bond issuance is projected to reach $535 billion in 2025, up from $508 billion in 2024.
ETF growth has been impressive (up 73% since 2021), but ETFs still account for just 3% of the muni market—compared to SMAs’ 30% and rising share.
Mutual fund assets are declining in the face of SMA growth, as investors and advisors gravitate toward personalized, tax-efficient solutions.

SMAs grant portfolio managers the flexibility to be truly strategic—harvesting losses, optimizing maturity ladders, responding nimbly to credit and rate cycles, and aligning every security to a client’s evolving objectives.

What This Means for Wealth Managers and Advisors

This isn’t just a passing trend—it’s the new core of fixed-income investing for discerning clients. Personalized, transparent, tech-enabled fixed income portfolios are rapidly becoming the gold standard.

Key Questions for Your Team:
Are your clients benefiting from the full transparency and customization SMAs offer?
Is your platform ready to deliver direct indexing and tax optimization?
Are you leveraging the newest technology to manage portfolios efficiently at scale?
Can your firm deliver customized fixed income solutions without putting undue strain on your organization?

The SMA revolution in municipal bonds is a defining shift—one that asset managers, advisors, and wealth platforms ignore at their peril. As the numbers swell and industry leaders like Nuveen and J.P. Morgan double down on SMAs, the message is clear: To remain competitive, fixed-income teams must embrace customization, transparency, and technology-fueled innovation.

Is your practice ready to ride the next wave in muni bonds?

See the press releases on why our clients chose IMTC to help future-proof their businesses below:

Lord Abbett selects IMTC’s technology to offer more personalized fixed income solutions to clients

Key Sources & Further Reading:

Cumberland Advisors – “The Rise of Separately Managed Accounts – Focus on Munis” (Sept 2025)

Nuveen, a TIAA company – Launched High Income Municipal SMA platform (April 2025)

J.P. Morgan Research – SMA market size estimates (SEC Form ADV data)

Municipal Securities Rulemaking Board – Municipal bond fundamentals and market structure

This paper is intended for information and discussion purposes only. The information contained in this publication is derived from data obtained from sources believed by IMTC to be reliable and is given in good faith, but no guarantees are made by IMTC with regard to the accuracy, completeness, or suitability of the information presented. Nothing within this paper should be relied upon as investment advice, and nothing within shall confer rights or remedies upon you or any of your employees, creditors, holders of securities or other equity holders or any other person. Any opinions expressed reflect the current judgment of the authors of this paper and do not necessarily represent the opinion of IMTC. IMTC expressly disclaims all representations and warranties, express, implied, statutory or otherwise, whatsoever, including, but not limited to: (i) warranties of merchantability, fitness for a particular purpose, suitability, usage, title, or noninfringement; (ii) that the contents of this white paper are free from error; and (iii) that such contents will not infringe third-party rights. The information contained within this paper is the intellectual property of IMTC, and any further dissemination of this paper should attribute rights to IMTC and include this disclaimer.