He anticipates rolling out SNW HIP-rated bonds to more clients as they express interest in adding a socially responsible tilt to their portfolios.
High Impact, Low Cost
The aforementioned client, who is very interested in environmental issues, holds municipal bonds from a number of issuers including Clark Public Utilities of Clark County, Wash. The utility has a HIP score of 74, which Herman attributes to its large hydro power and renewables efforts, high reliability of power and diverse leadership.
Since Washington State has no state or local income taxes, such exemptions on tax-free munis is not relevant to clients based there. “We can go anywhere,” says Camrud. Brighton Jones has invested assets in impact-rated municipal bonds from such far-flung states as California, New York, Florida, Idaho and Georgia.
His firm looks at clients’ cash-flow needs for the next 10 to 15 years and invests in higher-quality shorter term bonds like those in the impact-rated bond portfolio. “It’s a win-win situation,” he says, “because clients still get good diversity, excellent credit quality, low costs and a degree of social impact.”
At SNW, the firm charges a fee of 30 basis points (0.3% of assets managed) for its impact-rated bond portfolios—just five basis points higher than what it charges for the bond portfolios it manages without HIP ratings.
Bernhardt says a lot of SNW’s investors use a blend of taxable and tax-free bonds. “Now all can be rated with impact,” he says.