Ron Bernardi was quoted in the Bond Buyer article “BDA seeks allies among congressional staffers”
February 2019—Bernardi Asset Management (BAM), a wholly owned subsidiary of Bernardi Securities, Inc. (BSI) has been awarded a Top Guns designation by Informa Investment Solutions’ PSN manager database, North America’s longest running database of investment managers for BAM’s High Income Municipal and Short-Term Taxable strategies.
Top Guns firms are awarded a rating ranging from one to six stars, with the number of stars representing continued performance over time. BAM’s High Income Municipal and Short-Term Taxable strategies were named a Top Gun with a star rating of 1, meaning products with this rating performed among the top ten within their respective universes, based on quarterly returns. This is a well-respected quarterly ranking and is widely used by institutional asset managers and investors
“The Bernardi team is proud to have the High Income Municipal and Short-Term Taxable strategies to be recognized as Top Guns and leaders among our peers,” said Tom Bernardi, CFA and lead portfolio manager.
The complete list of PSN Top Guns and an overview of the methodology can be located on http://www.informais.com/resources/psn-top-guns. For more details on the methodology behind the PSN Top Guns Rankings or to purchase PSN Top Guns Reports, contact Margaret Tobiasen at Margaret.email@example.com.
On October 1st,2018, Bernardi Securities began its thirty-fifth year of service to communities and investors across the country.
As part of our continuing desire to improve the platform we offer to our clients, we are pleased to announce Kevin R. Wills, Investment Banking Specialist has joined our team.
Kevin has over 15-years of experience in the financial service industry and has specialized in municipal finance over the last decade. He is a great complement to our existing team serving local governmental units in Illinois and across the Midwest.
Kevin has assisted school districts, community colleges, park districts and forest preserve districts with their financing transactions over the years. He is a graduate of Illinois State University and holds Series 7 and 66 licenses. He, his wife Katie and children reside in Bloomington, Illinois.
He is a tremendous addition to our public finance team. Kevin will assist us in better serving the needs of our clients, their staffs, their boards and ultimately their constituents. As this is an important element of our firm’s mission, we are pleased he made the decision to join us.
For nearly 35 years, our commitment to the municipal bond market has remained resolute and unwavering. The addition of Kevin to our team solidifies our determination to continue the same course for many years into the future.
Thank you for your continued confidence and support. Please contact me directly should you have any questions or care to discuss.
Ronald P. Bernardi
President & CEO
Bernardi Securities, Inc.
Six months after the sweeping tax-reform package that cut corporate and individual rates rattled the $3.7 trillion municipal bond market, financial advisers say the fallout has proven to be a good thing for investors…
Ronald Bernardi is quoted in the most recent issue of InvestmentNews.
Cost is one of the most important factors in helping a retail investor determine whether a bond strategy is appropriate and the bond manager is effective, said Ronald Bernardi, chief executive of Bernardi Securities Inc.
“An investor is entitled to know what he or she is paying for a particular service, and I, as a professional, should be able to explain why I’m worth the charge,” Mr. Bernardi said.
And coming up with the prevailing market price to provide to customers could be a difficult calculation because different brokers are buying different amounts of bonds at slightly varying prices, according to Mr. Bernardi.
“The prevailing market price in the municipal market is very complicated,” he said. “It creates an extra workload for brokers.”
“The investor might say, ‘It’s too complicated, I’m just going to buy an ETF,'” Mr. Bernardi said. “I’m fearful that market liquidity is going to be hurt because of it.”
Bernardi submits letter to the U.S. Securities and Exchange Commission regarding RFC on Standards of Conduct for Investment Advisers and Broker-Dealers
Please find a copy of the letter Read here
Ron Bernardi was quoted in an Investment News article about the buying opportunity in Illinois.
Ron Bernardi was quoted in an Investment News article about the situation in Puerto Rico.
In recent months, we have often heard the refrain from investors, “I’m just going to wait until interest rates rise.” and, in fact, many investors are waiting for Federal Reserve policy makers to raise interest rates before committing money to the bond market. This attitude is understandable given the Federal Funds rate has been held in the 0% to 0.25% range for many months. Rates MUST go up, right? The answer, of course, is yes (but when and what interest rate are we talking about?). A portion of the hike in interest rates that investors are waiting for may have already happened. In just the past 15 months, the yield on the Benchmark, 10 year Treasury note has climbed from 2.65% to 3.55%, where it stands as of this writing. That’s a 90 basis point increase in yield at the same time the Fed Funds rate has remained unchanged.
Shown below is an analysis of four past Fed credit tightening cycles along with the resultant yield on the 3 year and 10 year Treasury notes during the same period. You will notice that the Fed Funds rate actually ended up higher than the yield on the 10 year T-Note in three of the four cycles!
July 1, 2004 thru September 2007
- Fed funds rate increased from 1.00% to 5.25% – plus 425 basis points
- 10-year Treasury note yield decreased from 4.56% to 4.52% – lower by 4 basis points
June 30, 1999 thru May 16, 2000
- Fed funds rate increased from 4.75% to 6.50% – plus 175 basis points
- 10-year Treasury note yield increased from 5.78% to 6.42% – plus 64 basis points
February 4, 1994 thru February 1, 1995
- Fed funds rate increased from 3% to 6% – plus 300 basis points
- 10-year Treasury note yield increased from 5.87% to 7.65% – plus 178 basis points
January 1988 thru February 1989*
- Fed funds rate increased from 6.50% to 9.75% – plus 325 basis points
- 10-year Treasury note yield increased from 8.79% to 8.98% – plus 19 basis points
*Fed funds rate figures for this period are approximated as Federal Reserve decisions were not officially announced at the time.
*Fed Funds rate figures for this period are approximated as Federal Reserve decisions were not officially announced at the time.
It’s important to remember that, historically, the Federal Reserve has not been an active trader of longer maturity bonds. Traders, investors and other market participants dictate the yields on long bonds based, in large part, on future inflation expectations. As the economy expands, these “participants” typically drive the yields of long bonds upward to compensate for the expected erosion of net return resulting from inflation.
Many expect the Federal Reserve to start raising rates later this year or in early 2011. We, too, have this expectation, but our view is tempered somewhat by the continued weakness in the housing market. The root cause of the 2008-2009 financial crisis was the collapse of the significantly over-inflated housing market. A modern day economy from which we can draw a parallel is Japan’s in the late 1980’s. Japan experienced a similar real estate meltdown and its economy is still dealing with deflationary pressures 25 years later. So we wonder, what is different for us today? Additionally, we believe the persistent, near double-digit, national unemployment rate and weak bank balance sheets will make it politically difficult for the Federal Reserve to raise short term interest rates too high or too quickly. Clearly, the Federal Reserve will have to walk a fine line as it attempts to spur the economy without stoking inflation.
We believe the reason many bond investors are maintaining high balances in low yielding money markets right now is because they’ve been scared into thinking the value of their investment will decline sharply if interest rates rise. They may well be right. They may be wrong. We do not know with certainty. However, we do know with certainty that approach has been dead wrong over the last 12 – 18 months and it may continue to be the wrong strategy for another 12 – 18 months.
In our view, it is the dreaded “total return” argument that is a questionable strategy for many bond investors. Annual total return measures the net coupon rate plus or minus the change in a bond’s value over a 12-month period. For those who hold the bond to maturity, the fluctuating value of their bond is meaningless; their net coupon rate IS their annual return. Investors looking for INCOME from their portfolio should not leave investment funds in near zero paying money markets waiting, hoping for rates to rise. Get the funds invested out along the interest rate curve and get your funds earning a higher return. Let’s be clear: this is not a blanket recommendation advocating 20 year bond investments today for everyone. We are advocating committing your funds beyond a money market time frame.
Here’s an illustration to bring this all home: Assume one has $100,000 available to invest in the municipal bond market. Let’s say you can invest the funds either in a 7 year, non-taxable municipal bond with a 3.00 % coupon, priced at par, or park the money in a money market fund yielding 0.30 %. An investment in the money market for 12 months gives you $300 while the bond returns $3000 annually. The money market investor retains liquidity, but at a steep cost.
Over the next three years, the bond investor will earn a total of $9000.00. Let’s assume money market rates increase 100 basis points over a 3 year period (we assume in equal installments on January 1st of each year), which mirrors the yield increase experienced by the taxable 3 year Treasury note from July 1, 2004 through September 2007.
Under these circumstances, the money market investment will earn approximately $1890.00 over the three-year period or $7110.00 less income than what is produced by the seven-year bond investment.
Of course, because interest rates have risen over this three-year period, the bond investment will have a market value that is less than its original cost, while the money market will presumably have retained its $100,000.00 value. If we assume nontaxable, municipal bond rates increase by the same magnitude (100 basis points) as the yield increase experienced by the taxable, 3 year Treasury note, the now 4 year, $100,000.00 par value, municipal bond will have an approximate market value of $96, 337.00. If the investor sells the bond after 3 years, he will realize an approximate principal loss of $3663.00. Subtract this principal loss from the $7110.00 gain in income cited above and the bond investment option nets $3447.00 more than the money market investment strategy. That is approximately 3.44 % more total return over the 3 year period produced by the bond investment versus leaving the funds in a low paying money market. That difference, in our view, is significant.
If you’re a buy and hold investor, the preceding analysis is moot. If you generally don’t sell prior to maturity, you know the score of the game at the outset, which is the yield you’ll earn and the amount you get back at maturity. What happens to the market price in the interim should ultimately be of little concern.
We are not advocating abandoning your current investment parameters by investing in long-term bonds and disregarding the potential of higher interest rates in the future. Rather, we suggest you adhere to your existing ladder strategy without focusing too greatly on trying to time the market. There’s a hefty price to pay for thinking you can predict the unpredictable.
Thank you for your continued confidence. Please call us with any questions or comments.
On Thursday, March 9th, approximately 50 industry groups representing issuers, investors, and state and local governments, participated in the MBFA/Court Street Group Research webinar on the Mismeasurement of the Municipal Tax-Exemption.
The Powerpoint presentation with audio can be viewed here
The webinar featured the commentary of:
- Ron Bernardi, President & CEO, Bernardi Securities
- George Friedlander, Managing Partner, Court Street Group Research
- John Godfrey, Senior Government Relations Director, American Public Power Association
The webinar focused on the recent rhetoric from Hill meetings and reports around Washington on the purported inefficiencies of the tax-exemption. Our experts discussed why the municipal tax exemption is efficient, what the potential implications for municipals are in tax reform, and prospects for maintaining the tax-exemption in tax reform.
- To view the Powerpoint slides for the webinar (without audio) click here.
- To view the JCT report from July 2012 click here