Co. Individual investors need to consider the structure of their existing portfolio before adding charter schools to the mix. One thing investors should not expect to see in a charter school deal yet is triple-A bond insurance. And while more charter schools would probably sell bonds if the deals were easier to do, the extra guarantee would also drain off some of the pop of those impressive yields. Last year, J.J.B Hilliard, W.L. Lyons Inc., which is owned by PNC, underwrote two issues for Michigan charter schools and demand for both was dominated by institutions like mutual funds, Corcoran said. In California, the issuance of charter school bonds has been scarce lately, noted Dan Osborne, a retail sales manager at Banc of America Investment Services in Los Angeles.
Nonrated issues are even more difficult to place in an individual's portfolio.
Investors should not be fooled by the connotation that all school bonds are safe investments, said a New York retail broker at a major Wall Street firm. People are enticed by the fact that they are school bonds, but I don't think people really understand what the credit risks are. These groups promise professional management oversight, and are believed to reduce the risk that a school will fail to meet its performance benchmarks. But as the market and growth of this phenomenon goes forward, there is less talk about renewals and more talk about schools' structure, financial guarantees, the strength of the management team, and academic performance. The school, which principal Brien Gardiner helped start, services 650 students in kindergarten through the eighth grade, with 150 of those classified as special-needs students.