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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 2016.
Total Investment Portfolio
The county’s total holdings at the end of October had a market value of $448.3-million. Excluding cash, the Treasurer’s Office has invested $389.9-million (86.9%) across a variety of fixed income security types. The total portfolio has a Yield-to-Maturity of 1.05% with an average maturity of 3.1 years.
Investing County Bond Proceeds
As we discussed in our last report, the Treasurer’s office is custodian of the $175-million capital building bond issued in August. Our mandate is to invest bond proceeds until all construction is complete.
Capital preservation is our top priority, followed by monthly cash flow of approximately $3.5-million.
These priorities mean we must invest for the short-term. We anticipate that the county will spend off of the bond proceeds within three years, with most of the expenditures occurring in the second and third year. Therefore, we structured our investment accordingly.
As of this report, our office has invested $195.1-million of the $205.5-million in bond proceeds. This investment is exclusively in high-quality municipal bonds. Uninvested funds remain in cash. Yield on the bond proceeds investment is 1.024% with an average maturity of 2.7 years. For comparison, yield on the 2 year U.S. Treasury Bond is 0.83%.
The Will County Treasurer’s Investment Policy sets two benchmarks against which we compare the performance of our investments.
- The 90-Day Average of the 1-Year Jumbo Deposit National Rate as quoted by the FDIC
- 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 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 (excluding cash and cash reserves).
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.