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Client with $7 million bond portfolio switches to municipal ladder strategy

Investor Challenges

                                

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CHALLENGE

An advisor’s longtime client sought a way to navigate new challenges in the municipal bond market.

SOLUTION

We conducted a transition analysis that highlighted the benefits of our municipal ladder solutions.

RESULTS

We transitioned the investor’s assets into a fully customized laddered bond portfolio.

Challenge

A former CEO came to us looking for a different way to manage his large portfolio of individual bond investments. He had a $7 million bond portfolio in a brokerage account, which his longtime advisor managed. Both the investor and the advisor were concerned about the new demands of the bond market and wanted a better way to manage the portfolio while investing $4 to $5 million in maturing certificates of deposit (CDs).


Parametric solution

The bond market at the time presented a host of challenges for managing a portfolio of individual bonds, including heightened concerns around credit risk and the potential for higher interest rates. Municipal bond investors working without professional advice also found it challenging to uncover value in a lower-rate environment with limited access to attractively priced bonds. 


Being familiar with Parametric's established reputation in the muni market, the advisor recommended that the investor switch to a Parametric municipal bond ladder portfolio. This would allow the investor to benefit from our large and experienced credit research team, our institutional purchasing power and access to new issue, and the defensive nature of a laddered investment approach to protect against rising interest rates.


Make transitions more transparent

Make transitions more transparent

Connect with our team

The investor and his advisor enjoyed a personal, consultative approach, working closely with a dedicated Parametric portfolio manager to design an optimized solution based on a number of factors, including the following:

  • Current bond exposure
  • Income needs
  • Yield target
  • Risk considerations: time horizon, liquidity needs, credit tolerance
  • Federal and state taxes
  • Best idea in the municipal bond market
     

After conducting a transition analysis for the investor, our team of investment, operations, and sales professionals met with him and his advisor to review the process of moving his individual bonds into a Parametric municipal ladders portfolio.


Results

The advisor transferred $7 million of his client’s individual bond investments into a 1- to 14-year Parametric TABS Municipal Ladders portfolio of national BBB-rated bonds. He also invested the $4 to $5 million from the client’s maturing CDs into the portfolio, as well as a lump sum of cash the client had recently received. 


The portfolio implemented was carefully customized to help the client meet his unique objectives, take advantage of current opportunities in the market, and potentially enjoy a more advantageous experience in a rising rate environment. 


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