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Goldman Sachs, Incapital Partner to Offer Municipals to Small Investors

By Marlene Y. Satter

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In a deal announced Wednesday, September 8, Goldman Sachs and Incapital have joined forces to offer sales of municipal bonds to the man in the street, not the man on the Street.

According to a statement by John Radtke, president of Incapital, “Our alliance with Goldman Sachs will give financial advisors at banks, RIAs, and broker-dealers access to a wide spectrum of new-issue municipal securities which previously have been difficult to access. We feel this will broaden the appeal of a very attractive asset class and provide greater diversification in distribution for municipal issuers.”

Charlie Paviolitis, vice president of the mutual bond department at Incapital, said that Goldman “will be taking advantage of the dealer-to-dealer network that Incapital put in place. We have approximately 175 broker-dealers who have done municipal bond business in the past tied into our network, and this [arrangement] allows them to access municipal bonds during the retail order period on deals in which Goldman is either senior manager or co-manager.”

Goldman’s usual clientele for its offerings includes the high-net-worth, corporations, governments, and other financial institutions. The arrangement will allow the company to reach the retail market through Incapital’s network of over 600 broker-dealers, bank trust departments, asset managers, and RIAs.

While investors are fleeing to bonds in search of safety in the troubled financial markets, munis themselves are no guarantee of solvency. The recent news that Harrisburg, Pennsylvania, would miss a payment has highlighted difficulties surfacing throughout the bond market as municipalities, beset by their own financial troubles, are finding it harder to deliver on obligations.

Investors are seeking out munis in a rejection of equities and in the quest for regular income streams, often at higher rates than bank CDs or savings accounts. In fact, the flight to bonds has become so pronounced that there is recurring talk of a bond bubble.