Within weeks of breaking away from Morgan Stanley and starting his own bond management firm in 2008, Bill Gurtin said the municipal bond market froze up, the result of the housing bubble bursting and bond insurance companies collapsing under the weight of countless mortgage defaults.
“No doubt about it, it was a difficult time in the market, but it was also a time that was enjoyable and satisfying to me,” said Gurtin, the founder and chief executive officer of Solana Beach-based Gurtin Fixed Income Management LLC, which manages more than $9 billion in clients’ assets.
“It’s times like these when you can make a difference. When you can talk to someone who is really nervous about everything, you can let them know that the money they have with us is safe….This was intended to be the ballast of your portfolio, and it is the ballast of your portfolio. This is a good place to be in times of crisis.”
Gurtin Fixed Income specializes in municipal bonds, or debt issued by government agencies and cities that pays a fixed interest rate over a specific term.
While the interest rate paid on bonds remains the same throughout the term, their values, like stock shares, constantly change as buyers and sellers trade the bonds and more financial data on the issuers is revealed.
Gurtin’s clients are generally “the 1 percenters.”
“We have about 20 who are on the Forbes 400 list (of wealthiest Americans). And our largest investor, and one of our largest clients, is the Fisher family, who founded The Gap (clothing store chain),” he said.
Crisis Management
Despite his clients having all of the trappings of wealth and access to sophisticated money managers, the financial crisis of 2008-09 caused many to go into a panic mode, he said.
Having been through several other financial crises, including the stock market plunge of 1984 and the Nasdaq crash of 2000, Gurtin’s instincts told him the market free fall was close to the bottom.
By March of 2009, aided by a massive infusion of federal dollars into the largest financial institutions, both the stock and bond markets began rebounding, and generally continued that trend through most of last year.
Gurtin, a native of Pittsburgh, has been in the bond business his entire career, starting in 1985 at Goldman Sachs, where he worked for 10 years before moving to Morgan Stanley. At the latter investment bank, he said he helped build the fixed income group’s holdings from about $2 billion to $5 billion over a five-year period ending in 2008.
At Morgan Stanley, Gurtin was charged with setting up a California office in Solana Beach. It was an easy choice for him.
“I thought San Diego was a great place to raise our family,” he said. “We (Morgan Stanley) needed a California presence because the bank had so many wealthy clients living here.”
Although Morgan Stanley wasn’t happy about Gurtin’s decision to form his own firm, he said he told the bank of his move well in advance and never hid anything. “We were very up front that this was going to happen,” he said.
Follow the Leader
Although Gurtin was legally prohibited from contacting any clients in advance, nearly all followed him out the door, he said.
That number has grown consistently in the last six years and stood at 706 as of the end of December, when the firm’s assets under management rose to $9.6 billion. Most of the clients come through relationships the firm has with registered investment advisory firms, which outsource their clients’ bond portfolios to Gurtin, he said.
Because of the money inflows, Gurtin expanded its staff by 20 people last year, bringing the total to 50, including 40 working in Solana Beach. The remainder work in Chicago. When the firm opened here it had six employees.
Gurtin only invests in what it calls “gilt-edged” bonds or those that are higher-grade issues and are deemed extremely safe for his investors. Rather than rely on the national rating services, Gurtin has its own research team of 10 people headed by Michael Johnson, the co-chief investment officer, doing deep-dive analysis on all the bonds it considers buying and selling.
The bond market can be extremely volatile, and has been over the past year as the Fed signaled its intention to raise interest rates, and oil prices shifted, said Todd Crescenzo, director for LM Capital Group Inc., a San Diego-based bond investment advisor firm.
“The price movement of long-term bonds can be as volatile as some stocks,” Crescenzo said. “But generally speaking, you’re always going to get back your principle.”