The once notoriously opaque municipal bond market has experienced many changes that have improved disclosure over the years.
Among those was the creation of the Municipal Securities Rulemaking Board’s EMMA website where issuers have posted bond and disclosure documents since 2009.
Improved disclosure in the market is due largely to people, like Mary Colby, who has been a managing director and head of the municipal research at Charles Schwab Investment Management since 2004 and retired Friday.
Colby, who headed CSIM’s municipal research team for 15 years, served on the executive committee of the National Federation of Municipal Analysts’ board (2007-2010) and president of the California Society of Municipal Analysts (2007-2010). The NFMA awarded her its Meritorious Service Award in 2011. Currently, she is a member of the Society of Municipal Analysts. She also headed Schwab’s investment stewardship committee.
“She was very involved in industry issues like disclosure and at the forefront of money fund issues,” said Peter Bianchi, executive director at Preston Hollow Community Capital.
“We understood in our roles that we have a fiduciary and professional responsibility to make sure the funds at Schwab were appropriately invested,” said Bianchi, who once worked with Colby at Schwab. “We both thought it was really important to get the appropriate information on the bonds we were buying, so disclosure was an important issue.”
Charles Schwab Investment Management
Colby began her finance career as an analyst at what is now S&P Global Ratings for six years. In 1996 she moved over to the buy-side, taking the job in Schwab’s San Francisco office. She said she discovered that while issuers were very forthcoming with the rating agencies, the same information wasn’t available to investors.
Colby’s first involvement with NFMA was working on a paper for the organization on disclosure.
“I did a fair amount of speaking to issuers about bond disclosure at various times,” Colby said. “While I still think disclosure is not as good as it could be, it’s better than it once was. More issuers understand the importance of investor outreach and that posting information on EMMA is important to everyone including the issuers themselves.”
Establishing a good relationship with investors means the issuer receives better treatment when it has a new deal coming to market, when they need to do a remarketing or when there is stress in the market, Colby said.
Issuers with robust disclosure, who have properly kept the market informed, were the ones who we able to gain market access during the pandemic, because investors were willing to hold or buy their bonds, she said.
“The issuers who are late reporting, or who don’t tell investors what is going on, those issuers don’t have the same liquidity in the market as those with better disclosure,” Colby said.
The biggest change aside from increased disclosure Colby has witnessed in her years in the industry came after bond insurers experienced huge ratings downgrades during the 2008 economic crash. Prior to the crash, more than 50% of issuance came insured, she said. A lot of buy-side shops would buy credits without heavily scrutinizing them if they were insured in the days before the crash, she said.
“It was a boon for credit analysts, because a lot of paper needed to be re-rated or analyzed in a way it had not been,” she said. “Even 15 years later, the insurance penetration is still fairly low, under 20%, probably. That is a major change in the market.”
What Colby said she is most proud of in her career are the people who she has helped that have achieved success in their careers.
“I have spent the last five years being very focused on formally and informally mentoring younger people coming up,” she said.
She also has been working with colleagues for the past two years to make sure there would be a smooth transition when she retired.
“Mary had been with us for 26 years, so she picked up a lot of responsibility,” said Patrick Cassidy, managing director, head of Schwab Asset Management trading, capital markets, credit research and investor stewardship.
Her management responsibilities will be split between three people.
Stephen Rowenhorst, whose time at the firm predates Colby’s will handle the money fund responsibilities. Colby was in charge of research and support for two municipal bond funds and seven municipal money market funds. Britt Sahi will take over her proxy duties.
Carol Spain, who has been working on integrating Wasmer, Schroeder & Co. a Florida-based fixed income manager focused on separately managed accounts the firm acquired in 2020, will work with the bond funds and SMAs.
“Everyone is sorry to see her go, but we will continue to have contact with Mary and she will be part of our personal lives forever,” Cassidy said. “She has been a great partner and friend and someone I could always rely on.”
Colby doesn’t have plans for a second act career-wise in retirement.
“My plans right now, are that I have no plans,” Colby said. “I have been working, or going to school, since I was 16. At this point, I am looking forward to having no schedule, not needing to be anywhere.”
She did acknowledge that she has been approached with offers, but right now she is looking to give back to the community.
The day she retired, she also became the chair of the board for the East Bay Agency for Children, an agency that provides services to lower income children in San Francisco’s East Bay. The program has social service providers, who work in the schools to help families sign up for benefits, or find housing, or food.