Continued speculation that municipal credits could deteriorate is helping business at Savader Asset Advisors LLC. The credit research firm this week added three independent contractors to its analytics team and plans to start broker-dealer operations this month.
“We’re in a great position. A number of firms that didn’t understand the value of fundamental credit research and the kind of advisory work that we did early on have since come to us,” said chief executive officer Mitchell Savader, who founded the New York-based firm in 2004. “We can either serve as a firm’s research department or we can supplement existing research departments, which is becoming more and more critical because of the increased demand now.”
Among the new hires is Greg Clark, whose career in the muni market stretches back to 1980 when he began with Moody’s Investors Service. Most recently he was chief credit officer of public finance for the German bank HVB Group.
SAA also picked up Howard Mischel, who in August departed from the global bond insurance ratings group at Standard & Poor’s to move to Israel. Mischel, the only member of the team who will work from abroad, also has a career spanning three decades, including as a senior manager for Moody’s.
Wendy Berry also joined the firm after 23 years as an investment banker, financial adviser, and rating agency analyst. At Moody’s, where she and Mitchell underwent training together in 1986, Berry was part of the public housing finance team for 15 years. More recently she focused on education and housing transactions as an investment banker with Jefferies & Co.
With these veterans Savader now has a team of 13 analysts to cover portfolios ranging in size from $48 million to $1.1 billion, and total about $6 billion.
“We see tremendous opportunity out there for credits — particularly those that have not been reviewed by the rating agencies for a number of years or were bought fully on the basis of bond insurance and so no one has ever looked at the underlying rating,” Savader said.
“That’s why people like Wendy, Greg, and Howard are so valuable. They have the experience to say, 'We understand what’s going on in municipal credit and we can look at a relatively unknown credit and tell you what’s really going on there.’ A junior person couldn’t do that,” he added.
Savader, who aims to hire the three veterans as full-time employees, said he disagrees with commentators who think there is a wholesale crisis coming. However, in particular niches of the market, such as speculative residential developments or continuing care retirement communities, he is forecasting trouble.
“We’re not necessarily saying there will be a broad number of defaults and bankruptcies, but credit quality will definitely deteriorate and there will be an increase in defaults,” he said.
The firm also plans to start up broker-dealer operations “literally, any day now,” Savader said. Steve Bevers is the first full-time trader to join the new operation. Bevers began his 25-year career in the muni market at Prudential Securities, now Wachovia Securities LLC. He also launched the municipal institutional trading department at Popular Securities Inc.
SAA is an affiliate of StoneCastle Partners LLC, which recently received approval from the Financial Industry Regulatory Authority to expand its trading operations into municipals.
With the new platform in place, Savader said his team can identify weak securities and trade them for more secure investments. “We can figure out where the problematic credits are and then work with the client to exchange those credits for other securities that are similar in all of their structural items but are better credits based on our analysis,” he said.
SAA’s clients include Crowell Weedon & Co., American Business Bank, Invesco Aim Management Group Inc., First Investors Co., and Diversified Trust Co.