Transcript
JUD HENNESSY: The municipal bond market today is dominated by institutions, large insurance companies and banks are an important part of the municipal bond market. Tax-free municipal bond funds and ETFs have become a much larger percentage of the municipal market over the years.
Wealthy investors who previously were sold individual bonds for their portfolios are now becoming more accustomed to purchasing funds and ETFs for their municipal fixed income needs.
In addition to the funds, separate account managers like Genoa Asset Management are now playing a greater role in the municipal bond market.
Last month, investors withdrew $1.4 billion from tax-free bond funds, the most since April of 2020, which was the height of the panic from the COVID pandemic. When the funds in ETFs do get these redemptions from investors, they are forced to sell bonds into an already weak market to make sure the cash is available.
Regardless of the conditions of the market, fund managers must sell to cover their withdrawals.
When this happens, all of the fund investors are affected by the disruption of redemptions.
Unlike mutual funds, separate accounts, or sometimes referred to as SMA are not directly impacted by other investors’ decisions.
If a client chooses to liquidate their portfolio, just the assets of that account are affected.
Long-term investors will have fluctuations in their portfolios but not necessarily suffer the gyrations of selling into a weak market or conversely chasing a strong market to be fully invested.
At Genoa, we actively manage our client portfolios to have the ability to pivot as market conditions change.
We can capitalize on market conditions by bidding on liquidation lists at levels we think make sense for our clients. We can also bid on smaller lots that fit specific account needs.
Our ability to customize client portfolios, will there be specific state requirements or scheduled distributions, is another advantage individual municipal bond portfolios have over open-end mutual funds and ETFs.
At Genoa, we feel that owning individual bonds that are actively managed and customized to the needs of the client is an appropriate strategy for your fixed income needs.
This is Jud Hennessy, Director of Portfolio Management at Genoa Asset Management speaking with you.
Thanks for listening.
Disclosures
Genoa Asset Management, LLC (“GAM“) is an investment adviser registered under the Investment Advisers Act of 1940 Registration as an Investment Adviser is no indication of any level of skill or training The information presented here in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs Prior to making any investment decision, you should assess or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances.
The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security The opinions expressed herein are those of GAM and may not come to pass This presentation does not intend to be a complete overview of the topic stated, nor is it meant to be a comprehensive discussion or analysis of the strategies discussed Investing involves risk, including the possible loss of principal As an investor, you should consider the investment objectives, risks, and fees carefully before investing The data available at the time of the presentation may be subject to change depending on current market conditions Although taken from reliable sources, Genoa cannot guarantee the accuracy of information received from third parties The information is current as of the date of this presentation and is subject to change at any time, based on market or other conditions.
The mention of specific securities and sectors illustrates the application of our investment approach only and is not to be considered a recommendation by Genoa There is no assurance that the securities purchased remain in the portfolio or that the securities sold have not been repurchased Charts, diagrams, and graphs, by themselves, cannot be used to make investment decisions.
Historical performance was affected by material market and economic conditions that were independent of and not controlled by F/m Investments, LLC or Genoa and may be different in the future.
Performance attribution characteristics along with Sectors and Holdings listed are taken from a representative or model account and may not mirror performance of your account Actual results of individual accounts and products, as well as account holdings, may vary due to client cash flows, timing of implementation, different custodians, the availability of underlying securities, regulation, and other factors Small accounts may underperform other accounts due to the potentially greater impact of transaction costs.
An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of certain asset classes Indexes are unmanaged portfolios and investors cannot invest directly in an index An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.
All securities investing involves the risk of loss, including loss of principal Past performance is no guarantee of future results.
