By Colin MacNaught, the CEO & Co-Founder of BondLink
It’s a difficult time to be a bond issuer. After four decades of growth, U.S. government and corporate bonds have lost nearly 10% in 2022. The post-pandemic global economy coupled with the war in Ukraine has driven inflation and interest rates to new highs, resulting in millions of dollars in additional borrowing costs.
According to ICI, 30-year muni rates have hit their highest levels since 2018, and more than $60 billion fled from munis in the second quarter of this year. Bloomberg recently reported that new issues were down more than 12% during the same quarter. Historically, it can take up to two years for demand to bounce back, especially in an oversaturated market that sees 250 different bond sales per week.
With only so much money to pass around, municipal issuers need to consider how to bring that investment to their tables. It’s not easy for borrowers to stand out in this market, but municipalities can set themselves apart and attract buyers by launching an investor relations (IR) initiative that anchors itself on transparency, accountability, and accessibility.
Why bond issuers need an investor relations program
Most investors operate with limited resources and time. They are much likelier to participate in a bond sale when issuers offer details openly and conveniently. Borrowers that package their documents adequately, share information consistently via downloadable material, and make it easier to follow the funded projects will have a much easier time attracting investors.
Investor relations initiatives help attract investors on a foundation of open communication and transparency. A successful program will help issuers accomplish three primary IR objectives:
- Satisfy the demands of existing investors and keep them coming back
- Attract new buyers and broaden your investor base
- Establish long-term, repeatable practices to foster stability and demonstrate strong internal governance
Here are four actionable strategies for municipal issuers to develop a strong IR program.
Build a solid foundation
Devise a long-term strategy to achieve specific IR goals with the help of your extended team of trusted advisors and bankers. Goals can be wide and varied, but they should center on creating opportunities and engaging a variety of buyers—large and small, institutional and non-institutional, as well as local and retail. Issuers should also develop mechanisms to measure the effectiveness of their program for annual reviews and adjustments.
One of the best ways to create opportunities and engage investors is to build out a dedicated, corporate-style IR website that provides potential buyers with details about your organization, your team, and current or future bond sales with all the necessary documentation available onsite for their review and evaluation.
Understand what investors really want
Before investors buy bonds, they need comprehensive information on maturity dates, ratings, fees, and yields. They’ll also be interested in your background and track record as issuers, and if they’re investing in a specific project, they’d like to receive updates on that moving forward.
Issuers can cut down the investor vetting cycle by offering easy access to all of this data in a central location. Aggregate your required disclosures, rating agency presentations, non-required documents, and other context in a location that investors can find any time they need it. This may sound simple, but it’s not unheard of for an investor to pass on participating in a deal simply because they couldn’t find what they wanted when executing preliminary research.
Digital roadshows can be particularly helpful to share the complete narrative about your credit, deal, and projects to entice the investor community to participate in your bond sale. Issuers concerned about the costs or value of producing a digital roadshow can repurpose existing material into presentations that live on their IR websites.
Be strategic with announcements
Bond sales are typically marketed five to seven days before the sale, limiting the time investors have to vet the sale and for underwriting teams to drum up interest. The solution is to announce your bond sale via press release and on the investor website as soon as the sale is authorized. It extends your marketing time, giving you the best opportunity to ensure that all sorts of investors are aware of the bond sale and have the time to evaluate it ahead of time.
Attend industry-specific conferences
Attending industry-specific conferences expand your knowledge of current trends and concerns that might impact your bond sale and IR goals. It might not be at the top of your priority list, but talking to professionals from adjacent or related industries will offer up insights that will impact your approach. State-level Government Finance Officers Associations (GFOA), industry-specific groups, and others all coordinate great events across the country.
While there’s a lot more to developing a robust IR program, these initiatives are a good place to start. Issuers that prioritize transparency, communication, and easy access to information by incorporating these strategies into their investor transparency initiative will see increased interest from a broader investor base.
Colin MacNaught is the CEO & Co-Founder of BondLink, a cloud-based investor relations and debt management platform for the municipal bond market. Colin is a Harvard graduate with over 15 years of experience in the municipal market. Prior to BondLink, Colin managed the Commonwealth of Massachusetts’ borrowing needs from 2008 to 2015. For his work, he’s earned two national Deal of the Year awards from The Bond Buyer.