Chicago Hosts Annual Investors Conference

August 6, 2018

Some of the most successful corporations spend one day every year updating investors directly on their financial performance, their financial outlook, and future goals and objectives. Titans of industry like Jamie Dimon of J.P. Morgan and Warren Buffett of Berkshire Hathaway see the benefits of personally investing in investor outreach and gathering feedback.

More and more issuers in the municipal bond market are recognizing the long-term value of providing investors with regular access to the leadership of their organization, too. And no one does it better than the City of Chicago, which hosted its 8th annual investor conference this week. Plus, as it has done in the past, Chicago made its “CEO” – Mayor Rahm Emanuel – available to bond investors. He focused on outlining the city’s current successes and future challenges, and took questions from investors.

The overview and description of some of Chicago’s numerous infrastructure projects was very impressive, but the most telling thing to me was that the Emanuel and city officials are very open about discussing the elephant in the room: Chicago’s pension issues. The city is not hiding or trying to skirt the challenges caused by the current pension funding level and is willing to discuss its approach of solving the underfunding problem over time. To paraphrase Mayor Emanuel: “It is not how some of you thought we should solve the problem, but you didn’t have to get re-elected.” The City of Chicago continues to be a “work in progress.” The theme of “we’re not done yet” in terms of reforms and financial improvements was recurrent throughout the day’s presentations.

The final panel of the conference included a very interesting discussion by Michael Sacks, Managing Director of the massive hedge fund Grosvenor Capital, which is based in Chicago. Michael encouraged the audience of investors to take a broader view of the credit features of the city, including the growth in jobs and business headquarters, wealth creation, and other macroeconomic indicators. It was very much a “don’t miss the forest for the trees” approach.

As highlighted by a recent The Bond Buyer article, Chicago continues to make great strides improving its financial situation and quality of life for its residents. For example, its projected deficit for next year’s budget is the smallest since 2008. While talking with numerous investors during the event, I got the sense that some thought that the high-yield muni trade in Chicago bonds had run its course, while others felt that spreads represent good value on a risk-reward basis. Either way, it is obvious that investors are recognizing a significant improvement in the city’s financial position since its nadir.

Whether Chicago deserves higher ratings from the agencies, I will leave to the city and investors to fight. I’m simply happy that the City of Chicago continues to tell its story to as many people who are willing to listen, and more importantly, it is willing to discuss the challenges that Chicago faces both now and in the future. I do know that most municipal analysts form their own credit opinion based on multiple factors and strength of management and leadership are always major considerations. Hosting this event annually, with the focus from the city’s top officials, speaks to its financial leadership.

In reviewing 10 of Chicago’s top recent accomplishments, one of the highlights that Mayor Emanuel mentioned was transparency. We at BondLink are proud to partner with the City of Chicago to enhance its already excellent investor disclosure practices.

Buy-Side Investor

BondLink Perspective - Former Muni Buy-Side Investor