Turmoil Leads Some To Go Solo In The Muni Market

When UBS Securities closed its municipal bond unit last year, managing director Matthew Roggenburg considered his options.

He thought about trying something related to his work, perhaps hooking up with another investment bank. He also thought about trying something new, like setting up an aerial adventure park in New Jersey’s Delaware Water Gap. Eventually, he decided on something both related and new: starting his own firm. Along with former colleague Sam Gruer, co-founder of JPMorgan’s municipal derivatives department, Roggenburg founded the financial advisory firm Cityview Capital Solutions.

“We wanted to stay very close to the market where we had spent most of our careers, which most recently was municipal derivatives,” Roggenburg said. “We thought we could add a lot of value being advisers to the client counterparties of the Wall Street firms. Our goal is to distinguish ourselves by being proactive rather than reactive, which is different than the traditional advisory model.”

Roggenburg and Gruer aren’t alone. A number of muni professionals have started their own businesses during the current market turmoil.

Former UBS derivatives head Seema Mohanty founded Mohanty & Associates, a financial advisory firm focusing on derivatives and structured products. Bob Lind, who managed the tax-exempt high-yield portfolio at Deutsche Bank, started Lind Capital Partners, which will focus on high-yield investments through a partnership and managed accounts. Steve Klein, former head of public finance and global infrastructure at CIFG, created First Infrastructure, which has turned into a sole proprietorship consulting firm.

The professionals behind each of the firms are trying to leverage their expertise to carve out a niche.

Mohanty, for instance, has experience on the issuer derivatives side, while managing director and former UBS colleague Zoya Gargiulo has experience on the investor derivatives side. This gives them a wider view of both the market and a client’s portfolio, Mohanty said.

At Cityview, Roggenburg and Gruer bring the analytical techniques they developed at big banks to a larger client group than would have had access to those tools in the past. Cityview can come up with ideas for issuers rather than just pass judgment on those presented by others, a role that’s especially important as the market’s largest banks contract their staffs, Roggenburg said. “From what we are seeing, there’s not a lot of creative, nuanced problem-solving going on out there,” Roggenburg said. “There is a whole range of solutions that can be brought to bear to remediate a distressed transaction, but it seems like many situations are being handled on an all-or-none basis. So much experience and talent has left the dealer side of the industry over the last year, and this vacuum creates opportunities for new small boutiques like Cityview.”

Lind, opening the high-yield firm, wanted to give individual investors access to a market that they may have in the past found difficult to invest in. Building on his experience with Deutsche Bank, Raymond James & Associates and others, Lind says he can offer access to high-yield investments to the high-net-worth individuals who would benefit most from them, he said.

“I like the ability to get direct access to individual investors and talk to them about the opportunities, because these bonds could really be things they didn’t know historically existed,” Lind said.

Setting up your own firm has a number of advantages, these entrepreneurs said. They range from small — such as the possibility of a shorter commute — to big — such as working more closely with clients, having the autonomy from a big corporation and getting to make all the decisions.

“The opportunity to be your own boss and create your own opportunities is a very exciting one and very rewarding,” Klein said. “Your success is a function of your own efforts.”

When you’re behind your own company, even an all-nighter seems OK, Mohanty said. “The reality is you are careful about every last thing because it’s all you and is a reflection of you,” he said. “There are good and bad aspects, but, overall, we really like the change. You can work until midnight and not really complain. I have worked plenty of late nights before. Nobody likes working late, but when it’s your own shop, it’s different, because things have to get done and somehow it is just more enjoyable.”

However, professionals must realize that it’s much easier to talk about starting your own business than to actually do it. Lind, for example, spent a significant amount of time researching his idea, meeting with asset managers, wealth advisers and others before jumping in.

For starters, your compensation is tied solely to the business you produce, with no guarantee of a paycheck each week. The first year can be especially tough because of start-up costs and the need to find business. Even if you have good contacts from your years in the industry, issuers may have policies that discourage them from doing business with new firms.

In addition, there are many issues you don’t have to worry about at a big corporation that you do need to think about when you’re on your own. Before opening for business, you need to address seemingly small details that can eat up large chunks of time, such as legally creating the company, finding office space and taking care of benefits. You no longer have other departments — accounting, finance, technology, legal, even maintenance — to rely on.

But for those who choose to dive in, the rewards can make those hassles worthwhile. “All of that comes at a tremendous cost if you’re within a large firm; it comes with a lack of freedom to do what you in your judgment may be a better use of your time,” Roggenburg said. “Freedom is a wonderful thing, and you don’t get that unless you’re running your own shop.”

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