The GMS Municipal Bond Four Category Approach
A Value Added Bond is a municipal bond that offers greater value because it is selling for less than its intrinsic value.
The investment grade bond market often over-reacts to sensationalized municipal bond news. When this occurs, all bonds of every type associated to the targeted issuer suffer. Bonds unjustly affected or painted with the same brush may be insured, backed by state aid, paid from untouchable dedicated revenues or fully collateralized. Value Added Bond offerings are most often found at a municipal bond specialty firm.
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A major brokerage firm with 20,000 brokers may choose not to offer Value Added Bonds because there is not enough supply to satisfy even a fraction of their clients and brokers. Conversely, if a large brokerage firm offers a small supply of Value Added Bonds, they risk their clients and brokers preferring this investment category over more readily-available Conservative Bonds that are in greater supply.
Many High-Net-Worth investors are under the misconception that all brokers have access to the same investment grade bonds. They do not realize regional bond firms like GMS offer clients Aggressive and Value Added Bonds that may not be readily available to brokers and clients of larger, national firms. Typically, these large firms do not have the infrastructure to educate their brokers on why a particular bond is Aggressive or offers Value Added.
Value Added Bonds can feature ratings anywhere from N/R to AA-. As with any investment, Value Added Bonds should be researched and questioned until the added value is understood.
GMS brokers are municipal bond specialists and can provide you with the information you need about Value Added Bonds to determine what the right investment for your financial goals is. Contact us today for more information or call 877-467-0070.