MUNICIPAL BOND Management
The BlueList Story
For many years, THE BLUE LIST, wrapped in twine with other business dailies, arrived early in the morning to the front door of US financial firms. THE BLUE LIST advertised new and updated fixed-income offerings. Arriving early was a must for brokers and traders to obtain the most attractive bonds at the best price and yields for clients. That spirit, arriving early to snip the twine, going the extra mile, and constantly searching for yield without undue risk, is the essence of BlueList Partners (BLP).
Tax-Exempt & Taxable Portfolios
At BlueList Partners, our goal is to preserve capital, provide reliable income, and create portfolios that have a low correlation and offer balance to more volatile and higher risk investments. Avoiding excess speculation, we carefully analyze and manage risk while investing opportunistically to improve returns. Leveraging our years of experience in trading, research, and portfolio management, BLP seeks to add value by incorporating an open-ended, performance-enhancing trading platform, macro and issue-specific credit analysis, and proactive, tax-efficient portfolio management. Balanced with a commonsense approach, based on reasoned judgment, BlueList Partners seeks to achieve after-fee returns that compare favorably to intermediate-term bond benchmarks.
How We Do It
BlueList Partners discovered that a large municipal bond issuer was violating its indenture when redeeming certain bonds before maturity. Negotiations led to $16,255 of added interest for clients.
When Detroit, Michigan filed for bankruptcy, BLP researched the city's outstanding debt stack. Dismissing most debt as too speculative, BLP focused on insured Detroit Water Supply System revenue bonds. When the market was indiscriminately selling all issues with the Detroit name, we were buyers of insured and uninsured water revenue bonds paying significant yield premiums.
BLP analyzed non-rated CIFG, a dormant municipal bond insurer. Finding a strong claims-paying balance sheet relative to insured bonds outstanding, BLP accumulated CIFG backed bonds over many months. In addition to above-average coupons, clients saw large price gains when Assured Guaranty, an AA rated insurer, purchased CIFG and assumed its obligations.
After an extensive review of the bond's collateral and legal framework, BLP purchased Puerto Rico Sales Tax, Senior Lien Revenue Bonds (COFINA), at large discounts to par. Believing in our research, we remained holders even though unexpected events and dramatic price swings tested our resolve. In the end, a payout close to the bonds face value or par, rewarded clients.
We are bargain hunters -- adding incremental return to portfolios by constantly picking up attractively priced odd-lots.
Bonds and Self-Management
BLP believes that owning a portfolio of individual bonds, with defined cash flows, is more structurally aligned to meet an investor's goals of principal preservation, lower volatility, and more predictable outcomes. Bond funds do not allow for specific maturity dates or interest payments. Simply stated, if an investor buys a bond fund with an average maturity of 20 years, the fund will likely always have a maturity of 20 years.
Amplified due to less liquidity, poor decisions by fellow shareholders in a bond fund may have a negative impact on fund performance and volatility. High levels of fund additions or redemptions make fund management difficult given that shareholder buy and sell decisions are usually emotionally charged and poorly timed.
Individual investors usually do not have the time or knowledge to manage a bond portfolio effectively. In today's fast-changing markets, it pays well to be both very conservative and very aggressive. BLP's view is that most individual investors are aggressive when they should be conservative and conservative when they should be aggressive -- with mistakes being particularly costly. Informed decisions make for wise decisions, and it is difficult for most investors to remain informed.
In our BLP Municipal Opportunity Portfolio, the firm seeks to increase managed assets up to a hard cap of $250 million. Size matters, and while there is room to grow, BLP is committed to remaining relatively small, nimble, and focused. We strongly believe this enables us to offer clients some unique advantages and is a distinction critical to our success.
BlueList typically works directly with high net-worth individuals or family offices and as a separate investment advisor to Wealth Managers and Financial Planners. Given our active bond acquisition platform, clients are required to use Charles Schwab as custodian.
BLP Municipal Opportunity Portfolio Composite Performance and Fee Schedule available upon request.
Recommended minimum account size of $1 million.
Glenn E. Ryhanych, CFA