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 September 2015.

Total Investment Portfolio

The county’s total holdings at the end of September had a market value of $301.9-million. The Treasurer’s Office has invested $239.2-million (79.2%) across a variety of fixed income security types (excluding cash). The total portfolio (including cash) has a Yield-to-Maturity of 92.6 basis points with an average maturity of 1,153 days (3.2 years).

Restructuring Cash for Higher Yield

The Treasurer’s Office holds approximately $62-million (21% of the total portfolio) in money market accounts at local community banks. We hold this money in reserve for unexpected expenses that take us beyond cash on hand in our main bank account. Over the past year, there have been few reasons to draw on this reserve. When we do, we replenish the balance. However, it is apparent that we have more reserve cash on hand than is necessary.

The chart below shows our account balances over the last six months. The shift in account balances is a direct result of the competitive rate environment among local banks. We started reallocating money in May as rates became more attractive, closing our account with The Private Bank.

Regardless of the shift among the banks, our office has determined that it is better to invest some of this money in long-term investments, rather than keep cash in lower-yielding money market accounts. In September, we studied our cash flow and came to the conclusion that we could invest $20-million of our cash reserves in order to earn more interest.

We will restructure the portfolio using $20-million currently on deposit with MB Financial Bank, Republic Banks of Chicago, and Midland States Bank. We selected these institutions both on rate and purpose without our accounting system.

Before the end of FY2015, we will make two investments.

  1. We will increase the amount of money managed by William Blair & Company by $10-million in the Treasurer’s Class C Fund account. William Blair has managed this long-term investment for our office since 2012. The core amount under management after increasing our investment will be $85-million plus all unrealized gains in the portfolio, which is approximately $6-million.
  2. We will add $5-million to a $20-million portfolio currently managed by ClearArc Capital Investments. This assignment is under review already, so we will not add to the investment until this review is complete and the management responsibility awarded in December.
  3. The remaining $5-million will pay the county’s bond obligation for November 2015.

With respect to the interest we receive on money market accounts, blended yield increased to 47.5 basis points (0.475%) from 35 basis points (0.35%). We now earn more on smaller cash balances.

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.

Maturity Structure

Maturity is the period of time for which an investment remains outstanding. Upon maturity, the bond issuer will pay back the full amount, plus any applicable interest to the county. This is how our office makes money for the county through our investment activities.

The Treasurer’s Office looks at the maturity of an investment with great interest because it must match our cash flow needs in order to pay outstanding bills and obligations. We invest operating cash into instruments with maturities of less than one year. Any money not needed to pay obligations within 12 months will be invested in longer term investments up to 10 years. We hold investments with maturities greater than 10 years. However, we actively trade those positions to capture investment gains from the overall bond market.

The average maturity of our portfolio is 1,283 days (3.2 years) as of this report.

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