Portfolio managers make the daily decisions that add up to the investment performance that investors see year after year. For our 30th anniversary series, we spoke to our longest-serving portfolio manager, Todd Curtis, who has managed the Aquila Tax-Free Trust of Arizona since its inception in 1986.
How did you begin working with Aquila?
Aquila had identified Valley National Bank, headquartered in Phoenix, as the sub-advisor for their Arizona fund. At the time, I was managing municipal bond investments at Valley National Bank, so I was the logical choice to manage the fund for Aquila. I still remember the first bond I bought: a 10-year Chandler Water Revenue bond paying 7% at par, $50,000 face value. I’d love to buy it at that price today.
It was March 14th—the same day that Oregon Senator Bob Packwood introduced legislation to take away the tax exemption on municipal bond income. We weren’t sure we were going to have a fund. Nearly thirty years later, we’re still here.
Is there more to managing the fund than investing in state and local municipal bonds?
Much more. We’re constantly doing analysis, observing the market, managing cash flow. We need to know what’s happening locally—state and city legislation, population growth and trends, what’s going on with parks, infrastructure, and so on. And to buy bonds we like, we need cash. It’s a very intricate process.
A lot of what we do hinges on relationships. Even with electronic trading, relationships still count. There’s a lot of negotiation. And having good relationships can really help.
Aquila is unusual for having local portfolio managers who live and work in the state. How does that help you run the fund?
It gives me a very good sense of creditworthiness—driving around and seeing where the dirt’s getting moved, and of course talking with people in the local community.
For example, I had a fairly heated discussion several years ago with a muni bond broker over a nursing home facility issue we owned at the time. While the broker’s opinion of the bond was more negative than my own, I took the safe road and sold the bond at a profit. Sure enough, a few years later the facility started having problems.
We’ve had tremendous growth in Arizona, and being on the ground has helped us get comfortable owning certain credits. For example, in our due diligence on Glendale’s sports facilities, we did a lot of asking around to gain comfort that the bonds were investable. A non-local manager might easily have passed on that issue.
What’s the benefit of being local to investors and advisors?
Local advisors find it easier to talk to us, in my experience. We make ourselves available for meetings with advisors and their clients. And they appreciate that we know what’s happening locally, from the state legislature to the local sports teams.
Driving to the annual shareholder meeting a few years ago, I took the back roads just to get an up-to-the-minute feel for aspects of the local economy. I was able to report that it looked like there was a really good cotton crop, and that Arizona was doing OK economically. People relate to that. We’re real to them.
What would you say to investors or advisors who attempt to manage a municipal bond portfolio themselves?
The municipal bond market isn’t as transparent as other markets, which makes it difficult for individual investors to buy and sell. Advisors might have better luck, but they’ll see less product than institutional investors, such as the Fund. We see a wider range of bonds. I think we bring a deeper and broader knowledge of the market, a bigger set of offerings, daily experience in the markets. It’s an advantage.
How did you start in this business?
I fell into it. After a short, unpromising time in insurance sales (unfortunately, I will take “no” for an answer), I got an MBA from Arizona State and was hired after graduating by Valley National Bank, as a trust portfolio manager. When Aquila launched this fund with the Bank as sub-advisor, I expressed an interest in this role and have been doing it ever since. It’s been great.
What do you like most about your role?
When we’re really active, the camaraderie of buying and selling with institutions—kibitzing with them, the back and forth of negotiating, the action of the market. It gets the adrenaline going.
Aquila has been incredibly loyal, while giving us complete independence to do our jobs. There is tremendous oversight along with confidence in our capabilities. It’s a wonderful way to work.
Before investing in one of the Aquila Group of Funds, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus. The prospectus is available here, from your financial advisor, or by calling 800-437-1020.