Christopher “Kit” Taylor has joined the advisory board of the Rockwater Municipal Advisors LLC fund of funds after a six-month hiatus from the municipal market.

The former chairman of the Municipal Securities Rulemaking Board began giving his two cents to the fund late last year. He now resides in rural Virginia, about 70 miles west of Washington, D.C., but will participate in board meetings with the fund that happen on a regular basis.

“If you spend 29 years involved with the municipal securities market, you get a good overall perspective of issues facing the market,” Taylor said. “To give you an example, in the last time the advisory board met we talked about the municipal bond insurance problems, so I gave them my thoughts on the issue and how it could play out for what the fund is invested in.”

Specifically, Taylor said the current problems with monoline insurers are likely to last all through 2008.

“The whole credit crisis and its impacts on those institutions that have large portfolios of subprime-related debt is going to take a lot longer than some people have been saying in the press, and I believe we are looking at a one-year time frame before this mess gets sorted out,” he said. “And on the housing side, as in those who can’t pay their mortgages, it is going to continue into 2009 and that could also impact the muni market from the issuer’s standpoint.”

The ex-industry representative also isn’t sold on news of Warren Buffett’s entry into the bond insurer market either. Taylor referred to some statements about the structure of the new insurance company, saying Buffett had said he did not intend to have a large group of analysts look at potential credits to insure.

“That isn’t your standard model for starting an insurer, and it is a little alarming,” he said.

As for the MSRB these days, Taylor said in an e-mail that “the items that the MSRB is talking about publicly are ones that we started long before I left. My sense (no direct confirmation) is that the systems are being implemented very rapidly. Such rapid deployment can produce glitches down the road, but who knows; I worked on the principle that the reputation of the organization would suffer a lot if a system failed.”

Rockwater Municipal Advisors emerged from the combination in November of Rockwater Hedge LLC — founded by Bryan Williams in 2005 — with CFI Investments. Charles Fish, former chairman of the MSRB in 1992 and 1993, worked at CFI and suggested to the newly merged company that Taylor be brought on board.

“It has been absolutely beneficial,” Williams said in an interview from Irvine, Calif., where the company is located. “Even at our very first meeting with him we got a great perspective on the marketplace. He touched on market movements, Treasury actions, [Internal Revenue Service] actions, a view on the [Davis v.] Kentucky case and they were perspectives that were richer and deeper than what we’ve gotten in the past.”

Rockwater offers both municipal arbitrage, the private placement fund of funds, and traditional municipal bond investment strategies. Some of the submanagers employ leverage. It has $450 million of assets under management.

Taylor joins Robert Anderson, Richard Freyburg, George Handjinicolaou, and Ronald Surz on the advisory board. He was replaced by Lynnette Hotchkiss at the MSRB.


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