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 2017.

Total Investment Portfolio

The county’s total holdings at the end of July had a market value of $399.8-million. Excluding cash, the Treasurer’s Office has invested $313.3-million (78.3%) across a variety of fixed income security types. The total portfolio has a Yield-to-Maturity of 1.273% with an average maturity of 2.9 years.

Reserve Cash Holdings

At the beginning of Fiscal Year 2017, we discussed how the 2016 Series Bond doubled the Assets Under Management (AUM) by our office. The spike in AUM means that our investment portfolio did not have as much reserve cash on hand as we prefer. As a result, our objective this year has been to increase cash reserves to levels that allow us to cover unexpected expenditures that arise throughout the year.

We allocated $25-million to rebalance the portfolio. The money is a combination of levy distributions to the county as a taxing body as well as cash flow control by our office. In the process of rebalancing, we successfully negotiated higher interest rates on our deposits, improving average yield to 64 basis points (0.64%) from 40 basis points when we stated the process.

As of July, the county has $83.6-million in cash reserves, which includes $8.4-million in set-asides for payment of the county’s bond obligations.

Yield

Corporate Fund Treasurers Fund Total
Associated Bank

0.75 %

$ 15,014,674

$ 15,014,674

MB Financial

0.65 %

13,706,480

$ 11,006,073

24,712,553

Providence Bank

0.60 %

2,995,773

3,001,529

5,997,302

First Community

0.55 %

12,504,777

17,006,498

29,511,275

First Midwest

N/A

8,359,645

8,359,645

0.64 %

$ 44,221,704

$ 39,373,742

$ 83,595,446

Will County Series 2016A Bond

The county’s Series 2016A Bond had an investment value of $175.6-million in July, including $7.9-million in accrued interest. The portfolio, excluding cash, earned 1.107%.

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 12-months, County Funds have held a 65 to 70 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, expect to change our benchmark by the end of the 3rd Quarter.

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 municipal 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 75 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.

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