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HomeMy WebLinkAboutMinutes 10-22-2008 ST. LUCIE COUNTY INVESTMENT COMMITTEE _________________________________________________________________ Date: October 22, 2008 Convened: 8:13 a.m. Tape: 1 Adjourned: 9:45 a.m. _________________________________________________________________ Present: Howard Conklin, Chairman; Todd Bevan; Mike Dillman; T.J. Buckley; Edwin M. Fry, Jr., Clerk of Circuit Court; Shai Francis, Finance Director; Lauri Heistermann, Deputy Clerk Absent: Chris Fogal, excused ________________________________________________________________ Due to equipment failure the entire conversation of the meeting may not be reflected in the minutes. Tape 1 I MINUTES The meeting was opened by Howard Conklin, Chairman. The minutes from the July 23, 2008 meeting were reviewed. It was moved by Mike Dillman and seconded by T.J. Buckley to approve the minutes from the July 23, 2008 meeting with the addition of Mike Dillman’s name; and upon roll call motion carried unanimously. The Clerk of Circuit Court recommended to the Committee that the minutes be condensed. Howard Conklin supported the recommendation. Todd Bevan stated that his concern would be if the Investment Committee had concerns with the portfolio and the specifics were not reflected, they would not be able to refer back to the minutes in the future. The Clerk of Circuit Court stated that if there were any specific issues, discussion about policy changes or the investments this information should be reflected in the minutes. Howard Conklin stated that if the committee members stated that they had a concern with something specific then this would prompt the concern to be reflected in the minutes. He suggested that recommendations by the committee be in bold. He suggested that after the first set of minutes are done, they Should be critiqued. 1 II. PRESENTATION OF QUARTERLY INVESTMENT REPORT The Clerk of Circuit Court presented the quarterly investment report for St. Lucie County for September 30, 2008. The Clerk of Circuit Court outlined the Investment Portfolio. He informed the Committee that he continued to draw down from the SBA. He stated that he felt that we were diversified with the portfolio and it was conservative. The Clerk of Circuit Court stated that all investment activity was in compliance with the bid process as outlined in the Investment Policy and all of the investment categories and portfolio composition percentages are in accordance with the Investment Policy. Howard Conklin asked if any of the Money Markets busted the buck. The Clerk of Circuit Court stated that they had not. He informed the Committee that we had made a transition in the Money Market fund. He stated that he wanted to minimize the risk as much as possible. Todd Bevan asked how they determined what pool to put money into. The Clerk of Circuit Court stated that the Money Manager’s each have $35,000,000 and this was a longer term portion of the portfolio and the Money Manager’s did not need to worry about the liquidity. The liquidity is managed internally. The Treasuries and the Agencies are from the Money Manager’s with the exception of the two year treasuries that had been laddered. He informed the Committee that when the tax money starts to come in there will be a huge increase in the amount of funds in the Money Market fund. He informed the Committee that he would like to build the Certificate of Deposits up to between $15,000,000 and $20,000,000. He stated that they had gone out for bid and when the bids were received it was decided to reject all of the bids due to the market. He stated that they would go back out for bids on the Certificate of Deposits in November. He advised the Committee that Standard & Poor’s had given the County a AAA rating on the portfolio. Howard Conklin commended the Clerk of Circuit Court. The Clerk of Circuit Court advised the Committee that they had to provide Standard and Poor’s with a monthly investment report for analysis. 2 III.PRESENTATION BY MONEY MANAGER – CAPITAL GUARDIAN – TELEPHONE CONFERENCE Chris Coburn gave an overview of Capital Guardian’s investment process. He introduced Wesley, Phoa, Portfolio Manager for St. Lucie County investments. He informed the Committee that Capital Guardian came through the market turbulence very well and unaffected in terms of the operational aspects. He stated that they had been managing fixed income assets for over 35 years with broad capabilities. He outlined the investment process with the committee. He stated that it was a very stringent process from research to allowing certain holdings into the portfolio from a risk and compliance perspective. He outlined the Investment Results as of September 20, 2008. He advised the Committee that the portfolio continues to move up. Wesley Phoa stated that in July and August there was a steady deterioration with the market. He stated that the market came close to complete collapse in September and October. He outlined the Portfolio by sector as of September 30, 2008. Todd Bevan asked for an explanation on the mechanics of TIPS. He stated that it appeared that they were bought at a very high premium. He asked for an explanation on the yield to worst column and how it is calculated. Wesley Phoa stated that the actual yield earned on TIPS depends on future inflation. They are issued at par and each month the principal outstanding is indexed to inflation. The coupon rates are paid on the inflation adjusted principal and not on the original $100.00 par amount. Todd Bevan confirmed that the income from a TIP bond is the principal increase and the coupon is paid out on the new principal balance. Wesley Phoa stated that this was correct. Todd Bevan stated that on the 3% bond if inflation is running about 1% then the total return would be 4%. Todd Bevan asked if any of the agencies were callable. Wesley Phoa stated no. He stated that these were all liquid agency securities. He stated that the difficulty with callables is that they are a lot less liquid. The clerk of Circuit Court asked what the issue date was for the 1/15/09 maturity date bond. 3 Wesley Phoa stated that he would have to look it up, but he believed that it was a ten year from back in 1999. He stated that most of the issuance is in the ten year region. Howard Conklin stated that there had been commentaries that suggested that there is a possibility of a downgrade in the rating of the United States credit rating. He asked what would happen to the portfolio if this did occur. Wesley Phoa stated that he felt a downgrade was unlikely, but he certainly would not rule it out. He stated that there is no reason to be concerned that the securities would not pay back principal and interest. The reason is that the US Government can print as much money as they want in order to pay back its own obligations. It has no standard what so ever to default voluntarily on its obligations. He stated that what they would need to be concerned about would be a burst of inflation or a collapse in the US dollar. Howard Conklin stated that the Investment Committee would appreciate input on the Investment Policy restrictions. He stated that the Committee would be open to suggestions that would allow better investments by the Money Managers. Wesley Phoa stated that they would submit detailed suggestions in writing. He stated that they may ask for clarification on government guarantee bank debt and if it would be permitted in the portfolio. IV.OPEN ITEMS There were no open items V.COMMITTEE COMMENTS/RECOMMENDATIONS Howard Conklin asked if there was any thought of increasing the amount of money that the Money Managers would have to invest since the County would be coming into a large influx of revenues. The Clerk of Circuit stated that at this point there is a lot of uncertainty for the County over the next few years. He informed the Committee that there may be additional stress next year on the finances compared to what the County had anticipated. He stated that he had concerns with giving more money to the Money Managers to invest long term, since the County may need that money to meet current obligations. 4 The Clerk of Circuit Court informed the Investment Committee that the SBA was using Federated as the overall manager for the SBA pool. He stated that they have a AAA rating from Standard & Poor’s and the pool is constantly monitored with stringent guidelines. He stated that the fees that Federated charges are 3 ½ basis points. He stated that the recommendation of the Committee had been to continue to liquidate the SBA pool. He stated that the pool was about 13% of the portfolio. Howard Conklin stated that he would like to see the SBA capped at about 12% of the portfolio. Todd Bevan voiced his concerns with the SBA buying commercial paper. The Clerk of Circuit Court stated that they will continue to liquidate the SBA as they have the opportunity. Howard Conklin asked what the prognosis was for Fund B. The Clerk of Circuit Court stated that they have been able to withdraw funds periodically. Howard Conklin asked what the balance of Fund B was at this point for all counties The Clerk of Circuit Court stated that it was under $6,000,000.00. The Clerk of Circuit Court addressed the Florida Local Government Investment Trust. He informed the Committee that it is a net asset value fund. The original amount invested was $38,000,000.00. The performance over the last 6 months has been disappointing. He informed the Committee that each quarter anything in excess of $38,000,00.00 is returned to the County as investment earnings. He stated that the last two quarters have had no return. Todd Bevan stated that the Committee was very pleased with the presentation that FLGIT had given several years ago. He stated that as long as there was a reason to have it in place he was fine with leaving the funds there. Howard Conklin stated that years ago the Board of County Commissioners wanted some diversification to break up the amount of funds being placed in the SBA. 5 The Clerk of Circuit Court stated that FLGIT has more flexibility in what they are allowed to do compared to the Money Managers. Howard Conklin suggested having FLGIT on a conference call. The Clerk of Circuit Court stated that they would continue to liquidate the SBA. He recommended keeping $20,000,000 in the SBA. Howard Conklin concurred. The Clerk of Circuit Court informed the Committee that PFM will do a presentation at the next Investment Committee meeting. VI. SELECT DATE OF NEXT MEETING The next scheduled Investment Committee meeting is scheduled for January 27, at 8:05 a.m. VII. ADJOURN There being no further business the meeting was adjourned at 9:45 a.m. 6