Alan Crain, chief financial officer of Kitsap Bank in Port Orchard, Washington, said his bank joined the platform even though he knew it was “nothing but competition” in the lending market.
“My recognition was that if we don’t work with them to do this, someone else will,” he said. “I’d rather work with them and understand how to pivot our business, rather than be left out in the cold.”
Kitsap manages a portfolio of about $280 million of municipal debt including the loans, and has participated in four transactions on the platform. Crain said that he’s seen the bidding process deliver lower rates for borrowers as well as more flexible terms for them, and said it helps improve transparency around pricing.
“When banks compete, you win” as a borrower, he said.
Muni Bondholders in Dark as Borrowers Shirk Loan Disclosure Rule
ETFs to Blockchain
Arnold and Dutta met in 2008, when Arnold was tasked with starting Pimco’s actively managed bond ETF products, an effort that she said stretched existing technology around compliance, trading and disclosure.
For example, the money manager had to address issues with pricing of ETFs, which updates instantly because the funds trade on an exchange, while mutual funds can sort out net asset values overnight if needed, she said.
Arnold’s request for more help with technology led to her connection with Dutta. Both spent roughly two decades at Pimco. She says ETFs were instructive in how to make small transactions financially viable, given that they had to be available for investors at a much lower cost than mutual funds, for example.
That’s now relevant to Alpha Ledger’s strategy of focusing on municipal loans, which tend to be smaller. The average size of loans the company has worked on is about $3 million.
“This is an exercise in small transaction size access and economics,” said Arnold, the company’s head of business strategy.