This report examines the performance of the public funds currently invested by the Will County Treasurer’s Office. This narrative covers investment activity and performance in July 2011.

Corporate Class C Fund

The Corporate Class C Fund is the principal operating account for the county. The Treasurer’s Office uses this fund to pay employees, vendors, and other operating liabilities.

As of July 31, 2011, Corporate Class C Fund had a total balance of $128,917,349. Of this total, we have invested 67.8% in six different fixed income classes ($87.5-million). The total value of the Corporate Class C Fund was unchanged, month-over-month.

The Treasurer’s Office purchased $10-million worth of investments in July using cash on hand. We invested this money in longer-term investments to capture higher yield. We now have $20-million invested with an average maturity of about 1.5 years and consider this sum a “reserve” pool.

Last month we explained our goal to see the majority of Corporate Class C Funds maturing within six to nine months. Specifically, our maturity target is 270 days. As of July 31, 2011, it was 255 days (γ=0.94).

Restructuring the Corporate Class C Fund has generated a 56.6 basis point increase in yield since we began investing the real estate levy in May. Despite the short duration of the fund, we are close to outperforming the 3-Year Treasury.

Treasurer’s Class C Fund

The Treasurer’s Class C Fund is the county’s capital improvements fund. The Treasurer’s Office holds proceeds from the county and township motor fuel tax, statutory proceeds, automation funds, and other department revenue.

As of July 31, 2011, Treasurer’s Class C had a total balance of $156,851,485. Of this total, we invested $122.8-million (78.3%) in bonds, certificates, and short-term corporate obligations. We hold $34.3-million cash.

At the beginning of July, the Treasurer’s Office sold a $10-million security for a premium, earning the county more interest than if we held the investment to maturity. This was the second security we have sold for a premium in as many months. Our normal approach is to hold securities until they mature. However, when an opportunity presents itself, we examine the benefits of the deal with the taxpayer’s best interest in mind and act accordingly.

Because July is a slow month for tax collection, we shifted our focus to the large amount of cash we hold in the Treasurer’s Class C Fund. We invested $85-million in agency, treasury and corporate bonds. As you can see from the graph below, we have driven yield close to 1.8-percent, a significant increase.

Despite the spike in yield, we continue to emphasis quality investments, liquidity, portfolio diversification, and yield—in that order.

We have discussed in previous reports that our goal was to set aside 85% of the Treasurer’s Class C Fund because the county draws less than $4-million annually from this fund. As of this report, we are 78.3% invested with an average maturity of 1.6 years because of restructuring.

Benchmark Tests

The Will County Treasurer’s Investment Policy sets two benchmarks to which we will compare investment performance:

  1. The 3-month average of the 90-day Treasury Bill as quoted by Bloomberg LP
  2. The Money Funds Report of all taxable 7-day simple yield as reported on www.IMoneyNet.com

As of August 1, 2011, both the Corporate Class C Fund and Treasurer’s Class C Fund exceed our policy benchmarks. The funds also exceed informal benchmarks against the 12-Month Treasury and 52-Week CDAR. Yield in the Treasurer’s Class C Fund also exceeds the 5-Year Treasury.

As of August 1, 2011 Corporate Class C Treasurer’s Class C
7-Day Net Simple 0.0200 % 0.7872 % (Exceed) 1.7964 % (Exceed)
90-Day Treasury Bill 0.0200 % 0.7872 % (Exceed) 1.7964 % (Exceed)
12-Month Treasury 0.1900 % 0.7872 % (Exceed) 1.7964 % (Exceed)
52-Week CDAR 0.2700 % 0.7872 % (Exceed) 1.7964 % (Exceed)

As we continue to find yield in the longer end of the investment curve, we would like to point out that both the Corporate Class C Fund and Treasurer’s Class C Fund now return higher yields than the portfolios the administration inherited in December 2010. We credit a more focused approach to investment as well as competitive pricing with our banking partners for the improved performance.

Summary

In the preceding quarter, the Treasurer’s Office rebalanced its investment portfolio to make it more diverse as well as improve overall performance. We achieved short-term objectives with respect to portfolio construction and expanded the number of depositories and brokers we work with. In the coming quarter, the Investment Team will work to complete the investment ladder to fund the county’s payroll during collection months.

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