America Builds With Municipal Bonds: How Regulated Funds Connect Savers to Infrastructure
Every school, bridge, water main, and road in America has a financial story behind it. As the nation marks its 250th anniversary, ICI is reflecting on what it means to be Invested in America, and that story starts with infrastructure. For millions of ordinary Americans, their role in this story is through their mutual fund, ETF, or closed-end fund. By pooling the savings of everyday investors and channeling them into the $4.4 trillion municipal bond market, regulated funds have become one of the most important and least recognized engines of American infrastructure financing.
The municipal bond market—which financed landmark projects like the Erie Canal in 1817—today finances roughly 90% of all US public capital expenditure. For most of its history, this market was the exclusive domain of high-income individuals. Regulated funds changed that, broadening access to municipal bonds for everyday investors and strengthening America’s infrastructure in the process. Today, an American saver can easily choose to invest in a fund holding hundreds of bonds across many states, sectors, and maturities, rather than navigating the cumbersome process of constructing a portfolio of individual bonds.
Regulated Funds Support Stable Infrastructure Financing
Beyond the sheer scale of capital they provide, regulated funds contribute to the functioning of the municipal bond market in ways that benefit issuers directly. Municipal bond funds provide a deep, reliable market for state and local debt, which means that governments can bring bonds to market with greater confidence and price them more competitively. Indeed, regulated funds have held a steady share of outstanding municipal securities for many years (Figure 1). At year-end 2010, these funds held 25% of the municipal bond market; by year-end 2025 that share was 29%.
Figure 1: Regulated Funds Channel Investment to Municipal Bond Markets
Percentage of total market value of municipal bonds held by regulated funds, year-end
*Other RICs include ETFs, CEFs, and UITs.
Sources: Investment Company Institute and Federal Reserve Board
That presence extends across the entire country. Capital from regulated funds reaches issuers in all 50 states, meaning that everyday investors participating in the municipal bond market through these tools are underwriting infrastructure in communities from New England to the Rio Grande and from the Pacific Northwest to the Florida Keys (Figure 2).
Figure 2: Municipal Bond Funds Provide Financing to All 50 States
Municipal bond funds’ net assets by state, year-end 2025
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1Municipal bond fund assets by state do not equal total municipal bond fund assets because of a small amount of assets missing state information.
2Data are estimated by dividing municipal bond fund assets by the total market value of individual municipal bonds available in Refinitiv.
Note: Data include mutual funds and ETFs, but exclude money market funds, CEFs, and UITs, therefore statistics presented are a lower-bound estimate.
Sources: Investment Company Institute, Morningstar Direct, and Refinitiv
Consistent fund demand translates into lower coupon rates and lower borrowing costs for issuers. With hundreds of billions of dollars in annual issuance—municipal bond issuance totaled $582 billion in 2025—these pricing advantages compound into meaningful savings for American communities across the country.
The breadth of what funds finance is equally striking. As of December 31, 2025, mutual fund and ETF assets were deployed across every dimension of American public life, including general government facilities, schools and universities, hospitals, transportation networks, water and wastewater systems, utilities, and housing (Figure 3). Each of these project types are critical for local communities, and funds help provide the necessary financing to make them possible.
Figure 3: Municipal Bond Funds Support a Wide Variety of Public Projects
Percentage of municipal bond fund assets by bond purpose, year-end 2025
*Other includes “recreation and conservation,” “unknown,” and “N/A.”
Note: Data include mutual funds and ETFs, but exclude money market funds, CEFs, and UITs.
Sources: Investment Company Institute and Morningstar Direct
Building the Next 250 Years
For more than two centuries, public finance has helped turn American ambition into American construction. Municipal bonds have long been central to that story, financing the roads, schools, water systems, and other public works that communities depend on. In the modern era, regulated funds have become one of the most important vehicles for channeling the savings of working Americans into the projects that communities rely on every day. As policymakers explore public-private partnerships to expand infrastructure investment, the municipal bond market and the regulated funds that support it remain an indispensable foundation—and a proven model that any new approach should complement, not replace.
As we celebrate 250 years of American independence, the municipal bond market and the regulated funds that invest in it deserve recognition as essential institutions of American civic and economic life. The next 250 years of American infrastructure will depend on them.