I was reading about the efforts of states to directly market their municipal debt to retail investors. From Business Week:
~~~ “In March 2008, retail investors bought half of a $1.75 billion issue of general-obligation infrastructure bonds and the following October they bought nearly 80% of a $5 billion issue of Buy California Bonds—short-term revenue anticipation notes for state budget needs that must be repaid by the end of the fiscal year in which they’re sold—yielding 4.25%, says Dresslar.
Nancy Kopp, the Maryland State Treasurer, also sees an element of patriotism in the excitement people expressed in being able to invest directly in state bonds. She heard retail buyers say they felt it was much more empowering to buy munis directly than investing in them via a mutual fund.
Jim Colby, senior muni strategist and portfolio manager at Van Eck Global, doubts that “patriotism” accounts for even 10% of retail investor demand. “They know income from munis is federally tax exempt and in some of the highest-tax states they are exempt from local taxes as well,” he says.”~~~~
Arguments made by both Treasurer Kopp and portfolio manager Colby are probably true… but I imagine that PM Colby represents the past of retail buying munis blindly through mutual funds and Treasurer Kopp represents the future… the future of muni issuers being more connected and forward facing to retail investors.
California already has a portal where they aggregate information for muni investors… it’s not very pretty but the important information is there for investors to evaluate. (How is it that thousands of startups in Silicon Valley build gorgeous sites that have no functional value and one of the largest debt issuers in the world has such a weak site? Disconnect anyone?)
Here is a thought for California State Treasurer Bill Lockyer… why not step around the dealers and build a direct portal for retail investors modeled on the federal government’s Treasury Direct? I’m not an attorney but I can imagine some clever departmental attorneys can scope out and work with any applicable laws…
As the issuer your responsibility is to keep investors informed… you can do that without the dealers… and of course keep the dealers onstream to utilize their distribution networks. But you need 3rd millenium debt distribution… time to go direct. CaliforniaDirect… sounds good…