With the increased need for capital to fund infrastructure projects across the U.S., new issuance of municipal bonds presents opportunities for investors. Prime Services’ Bjorn Franson reveals what happens at the intersection of infrastructure and investor interest in the muni market.
What is the intersection between the municipal bond market and infrastructure?
The $3.8 trillion municipal bond market is the primary source of capital for maintaining and developing our nation’s infrastructure. The American Society of Civil Engineers estimates that we have approximately $2 trillion in unmet infrastructure needs and that currently, we’re paying only half of the costs necessary to properly maintain transportation, power, drinking water and other public utilities. Addressing these infrastructure needs through new issuance will add new muni supply to the market.
Is there enough demand in the market to absorb new supply?
As a result of tax reform, there is increased demand in munis from retail investors looking for tax-exempt investments. There also continues to be demand from non-traditional muni investors, including institutions, foreign entities, insurance companies and pension funds. Between these two segments, there is an appetite in the market for new issuance and new supply.
How can a manager or investor take advantage of this demand?
An investor can take advantage of opportunities in the muni market by adopting a direct investment strategy, or through fund structures like hedge funds, mutual funds and ETFs.
What role does Pershing play in infrastructure?
BNY Mellon | Pershing, given its 80-year history in the clearance and custody of securities, has a sound infrastructure in place to support municipal bond businesses. We work with leading muni brokers and investment firms to provide trading and financing solutions. With muni issuance and opportunities growing as a result of our country’s infrastructure needs, Pershing’s Prime Services infrastructure is ready and able to service your muni needs.
Published by The Bond Buyer, September 3, 2019
Bjorn Franson is a Vice President for the Prime Services division of BNY Mellon | Pershing. In his role, Bjorn focuses on business development and manages relationships with hedge fund and alternative asset manager clients. He is also a board member of the Municipal Bond Club of New York.