Money managers now control the largest share of state and local government debt. According to JPMorgan Chase & Co., the growth in individually tailored municipal-bond portfolios has accelerated, shifting the balance of power in the debt market toward these specialized investment firms.

These private accounts have swelled to a total of $1.6 trillion. This expansion shows a clear preference for customized portfolios over generic bond funds, as investors seek specific tax advantages or risk profiles that only tailored management can provide for municipal holdings.

This shift means a few large managers now hold immense influence over the pricing and liquidity of municipal securities. By controlling such a massive volume of debt, these firms dictate how state and local governments access capital through the bond market.

Concentrated ownership of this scale changes how government debt is traded. The rise of these private accounts creates a new market dynamic where tailored portfolios dominate the holdings of state and local debt.