CEO Gurinder Ahluwalia says he co-founded 280 CapMarkets with Chief Technology Officer Prescott Nasser and several others to help independent advisors buy individual bonds for clients via a more tech-driven efficient way and with a level of transparency to meet the needs of advisors and the regulators.
Such a cloud-based platform, Ahluwalia reasoned, would be particularly attractive to advisors who had used bonds while employed at the wirehouses but who as independent advisors no longer had the resources or platforms to do so.
Using a platform accessed through their desktop computers, “we could bring a lot of that power directly to them,” Ahluwalia says, backed up by what he likes to call “the last mile” of execution. “You can tell people where and how” to buy individual bonds, he says, “but if you aren’t willing to help them do the transaction it’s a challenge. We put the dealer in place” in its platform, called BondNAV, which was launched last year.
On May 8, the company introduced a reporting function called 280 BestX, which fulfills the Municipal Securities Rulemaking Board’s requirement, in Ahluwalia’s words, “that you used resources to find the best prices” for executing client trades for an individual bond. The report meets the MSRB standard by transparently showing the best offers for that bond, its trading history, other bonds in the series and from the same issuer and the process provided by 280 CapMarkets’ trading desks or platform in achieving best execution, including a pre-trade review. “We’ll give you a report documenting how we went to market, what prices were available, and show best execution for the client,” says Ahluwalia.
A demo of the platform showed how 280 CapMarkets can produce that trading execution reporting in an efficient and transparent way.
Once, logged into BondNAV on May 9 for instance, 65,000 individual munis nationwide were listed. Advisor users can search by geography—state or county or city or issuer—depending on the client or advisor’s investing preference. (The BondNAV platform currently works only for muni bonds; CapMarkets is working on incorporating corporates, mortgages and high-yield bonds onto the platform, though advisor users can use the company Advisor Liaison Desk to conduct transactions offline.)
Users can pick a desired yield using a slider, along with other bond basics such as ratings, whether they’re callable or not, duration or other bonds in a series or from the same issuer. Available bonds are displayed on a map of the United States, allowing the user to zoom in on ever-smaller state, county or city views of the issuer, along with the number of bonds available in each jurisdiction.
While using BondNAV (which is free), an advisor can also send notes to 280 CapMarkets’ trading desks with specific instructions or requests. Advisors can also use the system to purchase bonds from 280 CapMarkets’ own inventory, with pricing and trading transparency always clearly marked.
The platform thus presents you with the context of an individual bond or other bonds in a series, disclosures of the issuing authority and the trading history of the specific bond, other bonds from the same issuer and similar bonds from other issuers. When it comes to the price of the bond, BondNAV also provides an independent valuation from the third party ICE Data Services.
Can 280 CapMarkets provide help with advisors’ model portfolios? “We’re not an RIA,” cautions Ahluwalia, but rather a broker-dealer “so we can’t offer advice.” However, advisors can request and the firm can and does deliver portfolios for advisors comprising, for example, “$10 million with seven to 10 pieces of a certain credit quality or duration and in a specific state,” reports Ahluwalia.
In the year since 280 CapMarkets’ trading went live, Ahluwalia says “business is going well,” with the San Francisco-based company counting 40 employees operating from four offices. Asked what differentiates the firm, the former AssetMark CEO says that especially in the bond business, “it’s all about trust, so we’re very transparent.”