Fidelity Investments has reached an agreement with municipal bond software issuer BondLink to provide clients access to BondLink's aggregated issuer data on its website.
"The municipal bond market is driven largely by retail investors," says Colin MacNaught, BondLink co-founder and CEO. "Yet the ability for individuals to efficiently research a governmental issuer is extremely challenging. We’re excited and proud to partner with Fidelity because it’s a leader in empowering retail investors through technology and research. Transparency is the key for issuers to unlock more demand from individual investors."
The process of the integration with Fidelity Investments started back in mid-October of 2018 with California’s $2.29 billion bond sale.
Enhanced client disclosure and access is supported by market regulators, as well as issuer and investor trade associations. Academic research also shows that better, more accessible disclosure can lead to lower costs for issuers.
"Fidelity was one of the first firms to enable individuals to buy bonds online, and we offer a transparent experience including a fully disclosed, $1 a bond markup for secondary bond trades," says Richard Carter, vice president of fixed income products and services at Fidelity Investments. "A fundamental piece of the investment process is to research and assess information about the issuer. Giving our clients easy access to BondLink provides them detailed information and data as they determine their investments in municipal bonds."
MacNaught noted that retail is a major holder for any issuer, but the ability for retail investors to get easy access to issuer information has been hard to come by.
“We’re excited to work with Fidelity because it’s such a major channel for retail investors, and because it puts a premium on research and transparency," MacNaught says. “Making the connection between the bonds and the projects being funded by the bonds is critical. Investors want to know where their money is going. With this feature, investors will have the ability to choose a bond based on the type of project being funded.”
He also added that the client can also select a bond to buy based on the level of issuer transparency.
Recently, higher interest rates and stock market volatility have undermined gains.
“We’re confident this will help our clients sell a lot more bonds to individual investors. But we’re also confident this will signal to issuers as to the benefits and importance of timely investor transparency and access to information," he says. “All issuers want to stand out to the bond market. Ten or 15 years ago, ratings were the way to stand out. In today’s market, when most issuers are highly rated, the best way to stand out is through transparency and utilizing technology to provide efficiency gains to investors.”
Issuers were generally complimentary of the news, saying that more transparency is important to market to retail investors and the industry has been moving in the direction of doing so.
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"We have Fidelity in our selling group and have been pleased with them. It's interesting that they found value in BondLink," said Michael Gaughan, executive director of the Vermont Municipal Bond Bank. "Giving more individual investors better access to information is always a good thing for this market."
Some issuers said they are considering the value add and pricing benefit for using BondLink, evaluating whether it makes sense for them and that issuers always have to weigh the cost benefit of fee-based platforms.
"We’re looking for ways to complement our existing distribution by reaching the next generation and first-time individual investors through online platforms," Gaughan said. "Fidelity is one example of a platform that’s pretty easy to figure out and allows an individual to learn about a deal, sign up for an account, and place an order within a relatively short amount of time."
CBI says adding BAM is a “big step for best practice in US green muni bond issuance.” MacNaught said that retail investors are online, they are mobile and as an issuer, you need to meet them where they are: online.
"If you’re not thinking of that, you’re missing out on the power of the internet," he said.
