Clark Capital Management Group, an independent investment advisory firm that manages $3 billion in assets, created a new fund that uses municipal bonds to hedge against interest-rate risk and formed a partnership with longtime muni professional Jonathan Fiebach to run it.
“We think there’s a lot of opportunity in the muni market, and that our skills are being able to identify that opportunity,” said Fiebach, who’s started a new company called Main Point Advisors, Inc., to make the investment decisions and manage the fund as sub-adviser.
The Navigator Duration Neutral Bond Fund, which Clark Capital launched on Sept. 23, holds a minimum of 80% of its exposure long in municipal bonds, Fiebach said. To hedge interest-rate risk, the fund includes some shorter exposures in the more liquid taxable markets, such as U.S. Treasury bond futures and Treasuries, as well.
“We see this as a way to give investors an alternative to having net long exposures to municipals where they can have the benefits that go along with the risks of muni bond portfolios,” he said. “Take away the interest-rate risk.”
Muni prices have been hurt by credit woes in Detroit and Puerto Rico, as well as a general lack of recovery from the financial crisis, Fiebach said, but a turnaround is nigh.
“I’m seeing credits beginning to improve, with the recognition that there’s still a lot of risk,” Fiebach said. “I view this as a really positive thing for the muni market.”
Fiebach, chief investment officer of Main Point Advisors, brings more than 25 years of experience managing hedged investment strategies at various firms, including the municipal bond department of Susquehanna International Group. He also founded Duration Capital Management Advisors, Inc.
Clark Capital appreciates the particular expertise Fiebach carries, said Harry Clark, its chairman and chief executive. “John has years of experience doing this, first with Susquehanna, and then with his own firm,” he said. “It’s very esoteric way to manage a bond fund.”
Clark founded the Philadelphia-based firm in 1986. About $200 million of its assets under management reside in municipals.