Executive Summary

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 October 2014.

Total Investment Portfolio

The county’s total holdings at the end of October had a market value of $229.2-million. The Treasurer’s Office has invested $186.4-million (81.3%) across a variety of fixed income security types (excluding cash). The total portfolio (including cash) has a Yield-to-Maturity of 87.5 basis points with an average maturity of 1,528 days (4.2 years).

As we have discussed in the past two reports, the Treasurer’s Office has sold a total of $20-million worth of long-term investments. The sales were a combination of factors that included the funding of payables such as bond service and Highway department expenditures. The sales also included the redemption of $15-million managed by William Blair and Company.

These sales mean that our office holds much more short-term investments than at any time in the last four years. Overall performance of the Investment Portfolio continues to lag our benchmark against the 3-year U.S. Treasury. We anticipate similar returns for the coming year until we have the ability to invest some county funds in long-term instruments.

As you can see in the chart below, the amount of investments scheduled to mature within six months continues to grow. Thirty-four percent (34%) of our portfolio will mature in this time period. These investments include money market funds and cash; and, as a result, have the smallest yields.

Reallocation of Treasurer’s Class C Fund Assets

As we discussed in our last report, our staff met with the Finance Director and her team this past July to discuss the way we invest funds that are part of the Treasurer’s Class C Fund managed by William Blair & Company. Collectively our goal was to adjust or end long-term investment for county agencies and departments with small budgets. Examples of these departments include Child Support, County Clerk Automation, and Workforce Development.

The total investment for this pool was $15-million of the $90-million under management. We redeemed this amount in October, assuring that participating departments do not have negative cash holdings at the end of the fiscal year. The result of this reallocation means that the total return will weaken, and we forecast a total return target of 70 to 80 basis points at the end of FY2104.

Treasurer Removes Money from IMET

On September 29, 2014, the Illinois Metropolitan Investment Fund (IMET), a cooperative endeavor created to assist Illinois municipalities with their investments, was informed of defaults on certain guaranteed loans caused by fraud on the part of a United States Department of Agriculture (USDA) approved lender.

On October 29, 2014, IMET reported that the County is at risk of losing up to $207,970 which is the amount of County money affected by the fraudulent activity. On October 30, 2014, our office withdrew all of its remaining money invested in IMET and placed it in a bank account that is 102-percent collateralized by the full faith and credit of the United States government.

Will County is one of 293 government entities that invest funds in IMET and has been affected by the fraudulent activity.

IMET has advised the County of its intent to recover funds. Our office will monitor the fund recovery process and will explore options to recover the full amount if IMET is unable to do so. Until this matter is resolved, the County does not have access to the $207,970. The potential loss of up to $207,970 will have no immediate impact on operations because of the County’s strong financial position.

Benchmark Performance

For the past 24 months, the Will County Treasurer’s Investment Policy sets two benchmarks against which we compare the performance of our investments.

  1. The 90-Day Average of the 1-Year Jumbo Deposit National Rate as quoted by the FDIC
  2. The 90-Day Average of the 3-Year Treasury Note as quoted by the U.S. Treasury Department

We use these two benchmarks because they closely relate to the length of time we hold an investment.

The table indicates two things. First, monetary policy of the Federal Reserve has led to an improvement in the 3-year U.S. Treasury bond yield. In the last six months, the 3-year UST has strengthened by an average of 20 basis points. Second, yield in County Funds over the same six month period are flat, having only improved 2 basis points. The spike in June, as we have previously explained, is the result of a rally in the corporate bond market at the beginning of the summer.

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 October 31, 2014, the market value of the Corporate Class C Fund was $118.2-million. Yield in the Corporate Class C Fund, was 69.5 basis points. Our cash position remains high as we have not reallocated funds from the IMET redemption.

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, automation funds, and other revenue.

As of October 31, 2014, the market value of the Treasurer’s Class C Fund was $91.2-million. Yield in the Treasurer’s Class C Fund, including cash and money markets, was 1.11%. Performance was stable during the period as the Treasurer’s office took no distribution or made no investment in the fund.

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