Digital workflow tools in the municipal market are increasing efficiency, freeing up talent to focus on the end client without completing tasks that would take far longer manually.
IHS Markit’s enhancement of its existing Ipreo suite of muni products, introduced Wednesday, represents a milestone toward achieving that goal, creating what is the first electronic primary platform that directly connects asset managers to the live new-issue process and information from the municipal bond dealer community.
"Across the financial services industry, technology has delivered greater efficiency and faster access to market data, but for the municipal buyside community, these benefits have not been fully realized," said Will MacPherson, managing director at IHS Markit. “Our new platform introduces a proven electronic framework for the information ecosystem in primary markets and is a continuation of our strategy to make primary markets more efficient by enhancing the connectivity between participants.”
Typically in the primary market, institutional investors have relied on deal wires and emails to receive transaction-related updates from dealers. That can result in thousands of manual updates being exchanged each week, creating an inefficient structure for managing transactions, possibly even inhibiting participation at times. MacPherson said this platform changes that.
AllianceBernstein’s vice president of investments and technology Gavin Romm and vice president of municipal trading Justin Horowitz said they have been focusing on digitization in the municipal space for some time but have been an early adapter to Ipreo Muni. It has taken away much of the manual work by providing an all-in-one platform that takes away the tedium that has existed in this space. Romm and Horowitz said that the Ipreo platform has streamlined much of what has slowed them down in the past. Coupled with their internal technologies and data tools, they both said that it has given them an advantage in the industry.
It is no surprise that participants often say that municipals are always the last to change and that it significantly lags other asset classes, however tools such as this are showing that things are changing.
Romm said that coming from the corporate space into municipals made him realize how bifurcated and inefficient this market has historically been and how much digitization is needed to free up and elevate their talent to focus more on end clients.
By using tools such as Ipreo Muni, “we are faster, more efficient,” Romm said. “Digitization has helped us immensely and digitization is real for this market.”
MacPherson said Ipreo Muni for the buy-side takes the extra steps out of doing business, eliminating the need for its clients to always pick up the phone or sift through thousands of emails a week. Horowitz noted that traders would need to sift through hundreds of lines of new issues in the primary and pull out the deals they wanted to send to portfolio managers.
Ipreo Muni allows municipal broker-dealers to feed all new issue to the buy-side, in one location, aggregating historical data pre-marketing data, preliminary pricing, repricing, spreads to benchmarks, CUSIPs and more. It also houses current and historical deal wires, Preliminary Official Statement links and other deal documents, which are archived in the platform. It layers a workflow on top of this to help institutional investors manage the hundreds of new issue offerings each week, he said.
MacPherson thinks it modernizes that process with an electronic framework that optimizes the information exchange by streaming up-to-the-minute insight from dealers to the buy-side. It also features the official Ipreo municipal new-issue forward calendar with dozens of search parameter and enhanced functionality for summary statistics and supply distribution. Horowitz and Romm said for their business they envision a holistic integration of the different components of digitization.
As new companies and a younger, more tech-savvy and information-hungry generation comes of age in the space, the evolution of the market is speeding up dramatically and competition is increasing in other areas, as well.
Earlier in September, Ipreo and BondLink launched
“Even though so much of the muni buy-side has moved online, most issuers haven't adopted a digital strategy to reach investors,” said Colin MacNaught, CEO of BondLink.
“This 'demand gen' drives sales in every other market in the world, and for the first time, you're seeing issuers take advantage of these tools to drive their financings,” MacNaught said. “That's the genesis of the tools we provide issuers. Our technology gives leverage to a finance director or CFO, and it's an all-in-one workflow solution from printing to roadshows to investor intelligence.”
Furthering the trend of technology partnerships in the municipal space,
PFM launched
All of these tools flooding the market aim to bring together the various players in a streamlined way.
Patty Healy, Senior Vice President of Research and Portfolio Manager at Cumberland Advisors, said she feels as though she is getting pitched and demoed on new technologies every day.
“We need to stay on top of what’s out there, upgrade your systems,” especially given the fee consolidation going on in the industry.
“Who knows who is going to be the winner in all of this, but it is clear that everyone needs to be educated on these changes and how we think about the market,” Healy said.
And these changes are being welcomed by participants who say this asset class needs to finally make it to the adult table.
“Given the fragmented state of the municipal market with more than 40,000 issuers, many different structures, low liquidity, archaic benchmarks, delayed and non-standard financial filings, and now the explosion of taxable issuance, the market is ripe for more standardization of filings and more robust analytics to help investors make sense of this complex market,” said a New York-based strategist who did not want to be named. “This market in general is just hard."
