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Kraft Asset Management, LLC (KAM) offers a bond trading platform, through our strategic partner, BAM Advisor Services, LLC, that gives our clients the opportunity to compete on a level playing field with the institutional investors; a platform that provides fair pricing and access to a wider selection of bonds.
Based on the Federal Reserve’s ‘Flow of Funds’ statistics, institutional investors hold a vast majority of all bonds in the U.S. Because of the size and frequency of their trades, institutional investors have access to a much wider array of bonds, at fairer prices, than do individual investors.
KAM’s goal is to manage our clients’ fixed income portfolios in a way that maximizes net returns (after taxes, fees, and expenses) and that is consistent with client financial objectives and risk tolerance. With support from BAM Advisor Services, LLC, as sub-advisor, KAM provides the following bond trading services for our clients who invest in individual bonds:
- Development of an individualized fixed income investment plan that outlines strategies specific to each client.
- Wholesale bond prices through a competitive bidding process using multiple broker/dealers.
- Access to a large pool of bonds through multiple bond broker/dealers.
- An emphasis on high quality, short-to-intermediate term bonds.
- Reduction in uncompensated risks by focusing on bond characteristics (e.g., investment grade, sector concentration, geographic diversification).
- On-going credit monitoring of bonds held by our clients.
- Consideration of tax rates on recommended bonds.
What You May Not Know
Bonds are usually seen as stable, low-risk investments; too often just an afterthought in investors’ holdings. They are supposed to be the “safe and sound” portion of your portfolio. But today’s fixed income market has grown increasingly complex, with hidden risks and unstable securities. There are over two million different municipal bonds, compared with approximately 10,000 listed stocks on the major exchanges. Many people don’t understand what they are buying and most aren’t aware of the hidden markup costs.
Individual investors may not know how risky bonds can be. They are subject to defaults, downgrades, early calls and more. There are a variety of distinct risk factors that should be accounted for. Every detail is important to understanding a bond’s real value and overall characteristics.
The bond market is a price-negotiated market. With equities you can quickly know the value of a security: simply check the Internet. With bonds, there is no centralized pricing information. Prices for the exact same issue can vary widely, depending upon the broker. True costs are easily hidden from individual investors, allowing brokers to place excessive markups and markdowns on their transactions. Brokerages generally sell bonds from a selection that is held in their inventory. This means that buyers don’t get a real picture of the selections available throughout the competitive market, and bonds in inventory usually carry a higher markup.
Independent Assessment
Should you be thinking about a new strategy for your fixed income investing? Find out how Kraft Asset Management, LLC, would approach it. Contact us today for an independent assessment of your current fixed income plan or for additional details. Call 615.782.4286 or 615.782.7288. | 