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 August 2017.

Total Investment Portfolio

The county’s total holdings at the end of August had a market value of $400.9-million. Excluding cash, the Treasurer’s Office has invested $323.9-million (80.8%) across a variety of fixed income security types. The total portfolio has a Yield-to-Maturity of 1.309% with an average maturity of 2.9 years.

Short-Term Investments

One of our primary investment objectives is to insure our office has adequate cash when the county does not receive revenue from property tax collection. We achieve this objective by investing our tax distribution receipts between December and May each year.

As of August, our office had invested $38.8-million in short-term bonds and certificates. The investment will generate $542,071 in interest income, which is about 1.39% yield. These bonds mature like a rung on a ladder, allowing us to have approximately $5-million every two weeks in non-levy months.

The following chart shows the breakdown of our investment by broker.

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 continue to negotiated higher interest rates on our deposits, improving average yield to 66 basis points (0.66%) from 40 basis points when we stated the process.

As of August, the county has $83.3-million in cash reserves, down approximately $300,000 since July.

Yield

Corporate Fund Treasurers Fund Total
Associated Bank

0.75 %

$ 15,008,923

$ 15,008,923

MB Financial

0.65 %

10,706,375

$ 11,006,074

21,712,449

First Community

0.65 %

9,508,116

17,011,761

26,519,878

Providence Bank

0.60 %

3,000,000

3,001,529

6,001,530

First Midwest

N/A

14,075,208

14,705,208

0.66 %

$ 38,223,414

$ 45,094,572

$ 83,317,986

Will County Series 2016A Bond

The county’s Series 2016A Bond had an investment value of $173.9-million in August, including $7.9-million in accrued interest. The portfolio, excluding cash, earned 1.109%.

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 six months, County Funds have held a 62 to 94 basis point spread over the 1 Year Jumbo CD. The composition of our portfolio has more in common with Treasury Notes than bank certificates, as you can see from the chart. We will change our benchmark to the 1 Year Note in September 2017.

In previous reports, we discussed how the county’s bond lowered overall yield when compared to our benchmark, the 3 Year Treasury Note. Since the trend line for County Funds mirrors the trend line of our benchmark, we see this as indication that our portfolio is in line with expectations.

As short-term municipal bonds mature, our portfolio continues to improve against the 3 Year Treasury. Overall performance was 27 basis points off our benchmark in August. We expect to close the gap in the next twelve months as the bulk of the investment of our bond proceeds convert to cash.

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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