When governments issue bonds, either directly or on behalf of a conduit borrower, they deposit the proceeds in various funds which may include a defeasance escrow account, construction fund, capitalized interest fund, debt service reserve fund or sinking fund. Monies allocated to these funds are many times invested by a trustee until needed. While keeping bond proceeds in a bank account, money market fund or investment pool may satisfy liquidity needs, these investments may ignore the desire to also maximize yield.
KPM helps you evaluate all of your investment alternatives including:
Individual securities or a laddered portfolio of securities;
structured investments such as investment agreements (GICs), repurchase agreements (Repos) or forward delivery agreements (FPAs / FDAs); and
mutual or pooled investment funds, including eligible money market funds and state investment pools.
While the primary goals of investing bond proceeds are safety of principal, withdrawal flexibility and compliance with bond documents, investment policies and state statutes, the secondary goal should be to minimize negative arbitrage (the difference between the bond yield and the yield earned on investments). You should also consider the need to maintain a market value equal to par on investments within certain funds. Each bond fund may have its own investment goals and requirements.
How We Work
KPM does not sell investment products directly to you. We are not a broker/dealer. We are a registered municipal advisory firm that provides you fully independent advice on the most appropriate investment vehicles and acts as a bidding agent to procure the best available pricing at any given time. Some of the services we generally provide when investing bond proceeds are:
Evaluate permitted investments language along with the fund requirements and market conditions to assist you in determining the best investment vehicles for your bond proceeds.
Develop a bid specification in consultation with the trustee and bond counsel.
Coordinate the solicitation of bids in conjunction with IRS requirements for establishing a safe harbor for the purchase of investments at a fair market value.
Facilitate the documentation and closing of the investments.
Provide to the working group and maintain the necessary records of all bids received.
Our Value Proposition
KPM works diligently to ensure the most aggressive providers of both structured investments and exchange traded securities compete to provide your investments. We work with you and your counsel to structure investments that provide the best possible yields while adhering to permitted investment requirements and IRS bidding regulations.
You need to have a level of comfort that your advisors fully understand the mechanics of your transactions and are going to adequately represent you throughout the process. The advisors at KPM average over twenty years’ experience working with municipal bond proceeds. As a registered municipal advisory firm, KPM provides a fiduciary duty to its municipal clients. KPM will be available not only before the transaction occurs and during pricing, but also during the closing process and after the transaction has closed.
Transparency is an integral part of any bidding process. KPM is acutely familiar with the governing IRS regulations around the procurement of structured investments and will ensure that there are no hidden fees or undisclosed conflicts of interest during the bidding process.