…the separately managed account (SMA) structure proved its worth again. Our Bernardi Asset Management (BAM) tax-exempt strategies outperformed. Our SMA clients were not forced sellers and BAM’s strategy of allocating to high grade GO and essential purpose revenue bonds were two of the primary reasons. Ultimately, the SMA structure allows for greater control over portfolio activity and avoiding being caught up in the “herd” of market activity. Our BAM strategy returns below reflect this dynamic.
Part I: In this environment liquidity (rainy-day balances), revenue source prominence (lien priority and/or purpose), and income source flexibility are important aspects of a bond’s underlying credit quality. Our focus on public purpose general obligation and essential revenue source bonds largely provide such levels of security……
Part II: In light of impending revenue shortfalls, the underlying credit quality of a municipality entering the crisis and management’s ability and willingness to reduce certain expenses takes on significant importance.
Befuddlement and confusion are understandable human reactions when a situation changes rapidly and profoundly. Like Butch and Sundance, many bond market participants experienced similar feelings last month. Investors, issuers, portfolio managers, traders and regulatory authorities found themselves asking at some point: “What just happened?”
Here is a brief recap to provide some context:
Active and Passive
Fee or one-time transaction cost
Village of Mundelein | Lake County, IL
Snohomish County, WA
Grand Traverse County, MI – Township of Blair…
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