Bernie Schroer, a longtime fixture of the municipal bond industry, plans to retire onFeb. 27 from San Mateo, Calif.-based Franklin Templeton Investments, where he hasmanaged the mammoth Franklin California Tax-Free Income Fund - now $13.7 billion in sizeas of Nov. 30 - since 1987.
At the end of a career spanning almost three decades in which he became one ofCalifornia's largest investors, Schroer shared his thoughts on the state's currentbudget crisis in a telephone interview with The Bond Buyer on Friday.
"California always has been somewhat of a crazy state," Schroer said with a chuckle,adding that the state's leaders, though loathe to raise taxes, have a tendency to spendmoney before they have it.
Nevertheless, Schroer - born in San Francisco and a lifelong resident of the Bay Area -is confident that despite the widening budget gap and political sparring in Sacramento,the state will continue to meet its financial obligations.
Last week, Fitch Ratings lowered California three notches to BBB from A. The downgradewas the second from a major rating agency this month.
"There's no possibility at all" the state will default on its bond payments, Schroersaid, emphasizing that California's wealth and size will help it get its financial housein order.
The state's voters are likely to approve the proposal for a $15 billion deficit bond, ifand when it goes before them, according Schroer. The $15 billion issue would replace aplanned $10.7 billion sale facing a court challenge because it was not approved byvoters.
During the current fiscal crisis, Schroer has looked for bargains. He said he recentlybought California prison bonds and some of the state's enhanced tobacco bonds for thefund he runs.
"Bernie has made tremendous contributions to Franklin's municipal bond department duringhis sixteen-year tenure with the group," Sheila Amoroso, co-director of the firm'smunicipal department, said through a spokeswoman. "We wish him the very best in hisretirement."
Franklin is not planning to look outside the firm for new talent to replace Schroer onthe California fund, which is Franklin's largest tax-free fund, Schroer said. Rather,John Wiley and Chris Sperry - who have co-managed the fund with Schroer since 1991 and1997, respectively - will continue to manage it, he said.
Sperry has been lead manager of the roughly $399.7 million Franklin CaliforniaIntermediate-Term Tax-Free Income Fund for the past few years, since taking over thoseresponsibilities from Schroer, who has been involved with that fund since its inceptionin 1992.
Sperry also manages the California Insured Tax-Free Income Fund, the Oregon Tax-FreeIncome Fund, and the Florida Insured Tax-Free Income Fund.
Schroer, who was manager of trading at Kidder Peabody for over decade before joiningFranklin in 1987, said his retirement has been in the works for two years.
"I'm sixty-five years old, and I've worked long enough," Schroer said. He added that helooks forward to spending more time with his daughter and at the racetrack.
While he is looking forward to having more time to do as he pleases, Schroer isnostalgic about his career in the municipal industry. He recalls how, in the late 1960s,the stock and bond markets closed on Wednesday so that brokers could get their books inorder.
Technological advances have since made the municipal market much more efficient, Schroersaid. Municipal bond issues totaling $100 million in size - once considered large - havegiven way to billion-plus dollar deals as the U.S. economy has expanded. As a result ofconsolidation, there are also fewer firms today, especially on the West Coast, comparedto thirty years ago, Schroer said.
Looking back on the late business dinners, all he has learned, and the camaraderie,Schroer sighed, "It was great fun."
