Underwriters and investment managers continue to expand their municipal teams despite slow business this year, as firms realize there is an increased need for independent credit research.

The latest firm to the join the trend is asset manager Gannett Welsh & Kotler, which recently hired a new director of municipal research.

Sheila May is responsible for analyzing muni bond credits and incorporating credit functions into the firm's portfolio management and trading strategies. May oversees a team of municipal bond analysts and is based in the firm's Boston headquarters.

"Sheila has analytical expertise in nearly all sectors of public finance," said Harold Kotler, chief executive and chief investment officer, adding that she has over 25 years of experience and will be an "excellent addition" to the muni research team.

May joined Gannett Welsh from Boston-based Wellington Management Co., where she managed over $10 billion in assets for institutional portfolios and introduced a formal credit research and sector strategy process. She was also responsible for the training and managing of research associates, and spent time as a credit analyst at Moody's Investors Service.

Gannett Welsh has over $11 billion in assets under management, in taxable and tax-exempt mutual funds and separately managed accounts. In 2008, Affiliated Managers Group, along with Gannett Welsh management, acquired the firm from Bank of New York Mellon.

Other firms have also expanded despite relatively slow business. JPMorgan recently hired a new head of muni research in an attempt to expand its public finance coverage. Peter DeGroot, a research analyst who oversaw indexes at Barclays Capital, joined in June and is based in New York City. The muni group has grown about 20% since the start of 2010.

Last May, David Jones, the founder and CEO of CastleOak Securities, said his company's staffing has increased 32.5% since the beginning of the year, and includes a team of six muni finance and institutional sales and trading specialists from SBK-Brooks Investment Corp. Eric Small, Nick Potonak and William Matlock lead the muni team and coordinate Midwest activity.

Also in May, Sterne Agee hired Justin Resuello as a new muni credit analyst to focus on state and local general obligation credits across the country, after the firm realized that despite low issuance, there is still a need for independent credit research separate from the rating agencies.

At the time, Philip Villaluz, head of muni research and strategy, said, "In this environment, investors are going to have to conduct more due diligence on underlying credits and there is a mandate out there today for independent credit work."

He added that the "rating agencies are a good starting place to understand credit risk. But the Dodd-Frank reform makes it more difficult for institutions to solely depend on them."

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