For our 30th anniversary series, Aquila Tax-Free Fund of Colorado and Aquila Tax-Free Trust of Oregon portfolio manager Chris Johns talks about persistence, the value of knowing your investors, and why he still finds the municipal bond market so fascinating.
You’ve been involved with Aquila Tax-Free Fund of Colorado since its inception, correct?
Yes. In 1985 the United Bank of Denver—the initial sub-adviser for the Fund—was approached by Aquila founder Lacy Herrmann about starting a state-specific municipal bond fund for Colorado. As the bank’s bond expert, I was assigned to the project. The proposal got as far as senior management of the bank, who declined.
One year later Lacy approached us again. A few things had changed on the bank’s side to make the idea more attractive and this time management approved it. Through Aquila’s persistence, the fund got off the ground. Read more “I’ve Loved This Work from the Start”
Continuing our 30th anniversary series, Aquila Regional Sales Manager Sherri Foster recalls the beginnings of Aquila, reveals what fund salespeople do, and explains why working in Hawaii isn’t what you think.
Your career with Aquila started with a chance meeting. What happened?
It was the summer of 1984 and I was a realtor in Lahaina, Maui. Lacy Herrmann (Aquila founder) and his wife Betsey wandered into my office. They were on a cruise and were walking through town. I showed them a condo, we talked, and they returned to their ship.
That winter I followed up with a phone call. Lacy ended up buying the condo. He now owned real estate on Maui and had a relationship with Hawaiian Trust Company (acquired in 1985 by current Fund Advisor, Bank of Hawaii). And he noticed that Hawaii didn’t have a state-specific municipal bond fund. Read more “Island Hopping”
The Municipal Bonds for America (MBFA) coalition conducted a “Municipal Bonds 101” seminar on July 2, 2014 for an overflow crowd of US Congressional policy makers and staff. The seminar is the second such event hosted by MBFA with the purpose of educating policy makers on the benefits provided by the municipal bond market and the problems associated with reducing or eliminating the tax exemption applicable to municipal bond income. Panelists speaking during the seminar included Ron Bernardi, Principal, President and CEO, Bernardi Securities, Mayor Steve Benjamin, Columbia, South Carolina, and Kevin Burke, President and CEO, Airports Council International, North America.
Information regarding the Municipal Bonds for America coalition can be found on their website.
Each of the municipal bond funds offered in the Aquila Group of Funds adheres to an investment strategy focused on investment grade bonds as a means of managing credit risk, and an intermediate average portfolio maturity as a means of managing interest rate risk. In keeping with our emphasis on high-quality holdings, the seven state-specific municipal bond funds offered by Aquila have no Puerto Rico holdings, whereas Morningstar has reported that roughly two-thirds of municipal bond funds hold Puerto Rico bonds.
The commonwealth of Puerto Rico has been grappling with budgetary issues which have generated a significant amount of attention in the municipal bond market and in the media. In late June, the Puerto Rico Governor signed the Puerto Rico Public Company Debt Enforcement and Recovery Act, which would enable public corporations (power and transportation agencies) to restructure their debt through a process similar to bankruptcy. Read more “Aquila Municipal Bond Funds Avoid Puerto Rico”
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. Read more “Long History of Local Investing”
Typically, during the months of June and July, a high volume of municipal bonds will mature or be called, leaving investors to roll those proceeds into other municipal bonds. This year, due to a recent decline in new municipal bond issuance, investors attempting to roll over maturing or called debt may be presented with some challenges.
In an effort to maintain balanced budgets, and during a period when voters have become more selective about approving new borrowing, states and municipalities have been issuing fewer new bonds. Based on data from Thomson Reuters through May 31st, year-to-date issuance has declined by 24.8% relative to the same period in 2013. Read more “Finding a Home for Cash in the Municipal Bond Market”
During the third quarter of 2013, in an unsettled national municipal bond market environment, hospital bonds saw an increase in selling pressure precipitated by uncertainty surrounding the roll-out of the Affordable Care Act. During that same time period, the United States Department of Justice filed a lawsuit against King’s Daughters Medical Center in Ashland, Kentucky for purportedly submitting false claims to Medicare – bringing further scrutiny to the sector in the state of Kentucky. The hospital charged-off over $40 million in the third quarter due to the impending settlement, and national ratings services consequently downgraded approximately $240 million of King’s Daughters debt. S&P lowered their rating from A+ to A, Moody’s downgraded from A1 to A2, and Fitch later downgraded the debt from A+ to A in the first quarter of 2014. Read more “Kentucky Hospital Bonds: Searching for Opportunity amid Turmoil”
You know you want to participate in the equity market, but how?
A growing number of investors recognize that it may be time to increase their allocation to equity. What may be less clear is determining how to go about positioning assets in the equity market.
Consider this: for several years, the Federal Reserve has been providing liquidity to the U.S. economy – liquidity that, to some degree, has contributed to the performance of the equity market. If boats rose on the Fed’s tide of liquidity, what happens when that tide recedes? Read more “Aquila Three Peaks Opportunity Growth Fund: Fundamental Analysis Matters”
Looking Out for Shareholders
Aquila’s locally-based trustees play a crucial role in advocating on behalf of fund shareholders. As Anne J. Mills looks back on her tenure as a trustee on seven Aquila fund boards, we talked to her about what trustees do and what she’s seen in almost 30 years as a trustee.
How did you become involved with the Aquila Group of Funds?
Lacy Herrmann [Aquila’s founder] and I met in the mid-1980s, when we were both running for president of our college’s alumni board. He beat me, although I did win a few years later. Read more “We Interview Anne Mills, Retiring Trustee”
For many years, the municipal bond market has provided investors with the benefit of earning income that is generally exempt from both federal and state income taxes. While several headline topics have raised concerns among municipal bond investors in recent years, our evaluation of current economic and market factors indicates to us that the condition of the municipal bond market may be better than you think.
Our new white paper, Municipal Bonds Better Than You Think, takes a look at the economic and market factors that have influenced the municipal bond market over the past several years, and reviews why we follow our specific investment approach in managing municipal bond funds. Read more “Municipal Bonds: Better Than You Think”