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 December 2016.

Total Investment Portfolio

The county’s total holdings at the end of December had a market value of $427.2-million. Excluding cash, the Treasurer’s Office has invested $336.5-million (85.8%) across a variety of fixed income security types. The total portfolio has a Yield-to-Maturity of 1.11% with an average maturity of 3.2 years.

Weakness in Cash Reserves

As we discussed in our previous report, we believe our portfolio does not have enough reserve Money Market cash as we prefer. The sudden change is the result of new assets under management related to the county issuing bonds in 2016.

Our objective in FY2017 is to increase cash reserves. We expect to allocate $25-million to Money Market accounts in the first half of the fiscal year. The money will come through a combination of cash flow control (a tactic now underway) and levy distributions to the county later this year.

$2.73-Million in Interest and Dividends in FY2016

In our December report, we discussed the preliminary estimate for accrued interest earned in the portfolio for Fiscal Year 2016. In a filing separate of this report, the Treasurer’s Office certified with the County Clerk the actual interest earned for the fiscal year ending November 30, 2016.

Including simple interest earned on cash deposits, total interest and dividends were $2.73-million.

Sell Accrued Interest

Interest/Dividends

Total

Broker-Dealers
Fifth Third Securities

$ 1,055.56

$ 324,081.85

$ 325,137.41

First Empire Securities

$ 0.00

$ 52,036.66

$ 52,036.55

JPMorgan Securities

$ 12,573.14

$ 853,051.24

$ 865,624.38

Private Bank Securities

$ 0.00

$ 540.76

$ 540.76

MB Financial

$ 0.00

$ 57,751.09

$ 57,751.09

Multi-Bank Securities

$ 0.00

$ 31,240.84

$ 31,240.84

Treasurer’s Class C Fund

$ 0.00

$ 8,547.33

$ 8,547.33

UBS Financial Services

$ 12,012.50

$ 871,977.96

$ 883,990.46

Wells Fargo Securities

$ 22,222.22

$ 117,089.58

$ 139,311.8

WinTrust Financial

$ 34,883.33

$ 153,675.00

$ 188,558.33

Banks
First Midwest Bank

N /A

$ 12,607.16

$ 12,607.16

MB Financial Bank

N /A

$ 43,011.08

$ 43,011.08

First Community Bank

N /A

$ 117,340.93

$ 117,340.93

Midland States Bank

N /A

$ 911.18

$ 911.18

Republic Bank

N /A

$ 3,598.52

$ 3,598.52

US Bank

N /A

$ 2,092.62

$ 2,092.62

Total

$ 85,746.75

$ 2,649,553.80

$ 2,732,300.55

Benchmark Performance

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
  1. 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.

We have included the 1 Year Treasury Note in this benchmark as an experiment. Over the last 24-months, County Funds have held a 50 basis point spread over the 1 Year Jumbo CD. The composition of our portfolio has more in common with Treasury Bonds than bank certificates, and we, as a result, may change our benchmark in the future.

The spread (gap) between County Funds and the 3 Year Treasury Note will continue to grow this year. This situation is the result of a large concentration of bonds that will mature in the next 24 months for use by the county to build capital projects such as the new courthouse.

For our analysis, we expect the trend line of County Funds to mirror the trend line our Treasury benchmark. If County Funds trend with the Treasury, we believe performance is in line with expectations, even if the spread grows to 50 basis points or more. Once proceeds of the Series 2016 Bonds clear and are spent, we anticipate the spread will narrow to historic proportions.

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 (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.

Tagged with:
 

Comments are closed.

Set your Twitter account name in your settings to use the TwitterBar Section.