Not many Rhode Islanders would recognize the name Lacy B. Herrmann. Yet his leadership has helped build our schools, the R.I. Convention Center, enhance the airport, develop wastewater systems and much more.
Herrmann established what is now known as Aquila Narragansett Tax-Free Income Fund. It is the only municipal-bond fund which focuses specifically upon investing in Rhode Island municipal projects. Founded 20 years ago with but $100,000 in Herrmann’s seed money, the fund now enjoys over $255 million in managed assets.
Herrmann passed away this past fall, leaving an extraordinary legacy as one of the earliest creators of single-state, tax-free municipal-bond mutual funds. His firm, the New York-based Aquila Management Corporation, was a pioneer in the category. A true visionary, he found a niche in the market by targeting smaller-population states with high tax rates.
This strategy resulted in the establishment of seven such funds in Arizona, Colorado, Hawaii, Kentucky, Oregon, Rhode Island and Utah. Together they enjoy over $3 billion in assets.
Investors in municipal bonds and mutual funds such as the Aquila Group of Funds finance municipal projects within the state where these investors reside, and generally pay no federal or state taxes on income from these investments. Offering such tax breaks is an effective way for city, county and state governments to spur growth and improve infrastructure that could not be paid for with cash immediately on hand. They also save taxpayer dollars because such bonds can pay lower interest yet still attract large and small investors thanks to their double (federal and state) tax-free status.
Herrmann had a special fondness for the Ocean State since his student days at Brown (Class of 1950). A true son of the university, he was a past trustee and the founder of its Independent Award Dinner, which provides a scholarship endowment for worthy students from the New York area. He was a past president of the Associated Alumni Association, a recipient of the university’s prestigious Brown Bear Award and was grand marshal for the 2000 commencement ceremonies.
Upon starting Aquila’s Hawaii fund in 1985, Herrmann saw its quick success and began to formulate similar plans for Rhode Island and other states. Calling upon his Brown contacts, he quickly introduced himself and his idea to a number of Rhode Islanders. For example, he met George Graboys and the then-newly hired Larry Fish of Citizens Bank, who partnered him with Sal DiSanto of the bank’s trust department and the Narragansett Fund was born. To this day, DiSanto remains as the fund’s portfolio manager and, along with his co-portfolio manager Jeff Hanna, is a leading cheerleader for it along with the Aquila team.
Herrmann also insisted on local trustees for Aquila’s state-based funds (there are three on the Narragansett board) as well as an annual shareholder meeting in Providence, which is quite unique in the mutual fund industry. This allows shareholders to meet the trustees, corporate representatives and the portfolio managers to discuss all aspects of the fund.
A native of New Haven, Herrmann was a Navy veteran of the Korean conflict, a graduate of the Harvard Business School and also studied at the London School of Economics. In addition to the Aquila Group of Funds, he was a venture capitalist - investing in a myriad of enterprises ranging from a South American airline to a Colorado silver mine, a stuffed-toy company and many more.
Herrmann served as chairman and CEO of Aquila until 2004, when he handed the day-to-day operations of the firm to his daughter, Diana, who remains as CEO of the Aquila companies. In addition to Diana, he is survived by his wife, Elizabeth (Betsey), a son, Conrad (Brown ’82), and two grandchildren (Christine is Brown ’16).
To many of us, we will miss his constant smile, endless flow of jokes and his trademark greeting: “You’re a good guy.” He will be well-remembered and sadly missed. I, for one, am pleased to know that Herrmann’s legacy lives on with the Aquila Group of Funds’ continued contributions to the economic development and quality of life in Rhode Island. •
David Duffy is chairman of the Aquila Narragansett Tax Free Income Fund and the retired chairman of Providence-based Duffy & Shanley.
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