By Conrad de Aenlle
LONG BEACH, Calif., March 21 Necessity may be
the mother of invention, but Internet businesses often seem to
get the idea backwards.
Instead of identifying a need and devising the means to fill
it, entrepreneurs will invent something and then keep their
fingers crossed that its presence will create demand for it.
Consider Munigo.com, a fledgling website that features
limited-time sales of corporate and municipal bonds at what it
says are below-market prices. The firm is positioning itself as
a Groupon for bonds.
Munigo members, who can sign up at no charge, receive an
email alerting them that a particular bond is offered. They can
then buy the bond through their own financial adviser or
discount broker; no trades are executed on the site.
Anyone who visits the site can see existing offers, even
without a membership. The firm also posts bond "deals" on
Facebook and Twitter.
Munigo LLC founder Bhu Srinivasan estimates that a member
can typically buy a corporate bond for 0.25 to 0.50 of a
percentage point below the market price generally available to
The dealers that Munigo negotiates with are willing to take
the modest haircut because it gives them access to the 16,000
members Srinivasan says the site has.
A private bond investor and serial Web entrepreneur,
Srinivasan bought Municipalbonds.com in 2008. He sold it in 2012
when he launched Munigo with the idea of making bonds more
accessible to retail investors.
He says he was inspired by the "great value proposition" of
Japanese clothier Uniqlo, where he once outfitted himself
quickly and cheaply for a last-minute trip, to name the company
Munigo. As for the business model, he was inspired by such daily
deal sites as Groupon Inc, Gilt.com and Jetsetter.com.
"We borrowed from the flash-sales concept that has worked
well in travel, fashion and consumer goods," he said. "It also
works well for fixed income. In fact, it's probably the only
asset class it works well for."
The reason, he says, is that the markets in individual
corporate and municipal bonds are notoriously illiquid and
opaque, as he discovered when managing his own portfolio. Most
of the tens of thousands of bond issues have no more than a few
trades a day, and research about them is hard to come by.
Skeptics might point to the thin markets as evidence of
little demand for a site like Munigo, but Srinivasan says his
approach can help investors wade through a surfeit of choices
and make bond ownership less confusing.
"Munigo is there to help transition you to your first bond
purchase," he said, "and for seasoned bond owners to make more
It is too early to tell if the approach works. Still in its
beta phase, the site features very few bonds; there were just
four between March 1 and 12, for example. Groupon, by contrast,
offered 862 deals one recent morning, and that is just for the
Southern California region where I live.
Anyone interested in buying bonds can find plenty of options
through conventional channels.
The Fidelity.com brokerage, for instance, had 548 corporate
issues listed recently on its website. Their maturities ranged
from five to 20 years, and Moody's credit ratings were between
BBB-plus and BBB-minus. The bonds offered annual yields from 3
percent to 6 percent, with significant differences even among
those with the same maturity and rating. Some were higher than
similar issues on Munigo; others were lower.
But Srinivasan says that by limiting the offerings, he is
actually performing a service to consumers. Whether it is hotel
rooms or gift items or bonds, "I don't need to see hundreds of
choices; I just need to see three or four good curated choices,"
The way Munigo chooses the bonds may give investors pause.
Dealers pay Srinivasan to place their bonds on the site, so
there could be a conflict of interest. But Srinivasan says his
business model is based on volume, so he will make more money
selling good bonds to many customers than he could by selling
something tainted to fewer of them.
He says he chooses bonds he personally thinks are worthy,
although he concedes that he is not a professional investor.
"I don't think you have to be an absolute expert to pick
fixed-income investments," he said. "It's not rocket science."
No, but it can still blow up in your face, said Louis
Stanasolovich, president of Legend Financial Advisors in
Stanasolovich, the only one of seven financial advisers
contacted for this column who was willing to offer comment on
Munigo, says he finds selecting the right issues tricky enough -
weighing credit quality, yields and call features - that he does
not fool with it.
He invests through mutual funds, an invention that meets the
need for low-cost diversification, transparent pricing and easy
buying and selling, and he encourages investors to do the same.
"I don't think individual investors know how to run analysis
on bonds," he said. "Bonds are a very complicated product, much
more than stocks.
"Most people who buy stocks can make mistakes and still
survive. With bonds you can shoot yourself in the foot,
especially at such low yields."