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HomeMy WebLinkAboutMinutes 04-20-2009 ST. LUCIE COUNTY INVESTMENT COMMITTEE _________________________________________________________________ Date: April 20, 2009 Convened: 8:20 a.m. Tape: 1 Adjourned: 10:20 a.m. _________________________________________________________________ Present: Howard Conklin, Chairman; Todd Bevan; Chris Fogal, Joseph E. Smith, Clerk of Circuit Court; Shai Francis, Finance Director; Lauri Heistermann, Deputy Clerk Absent: Mike Dillman, excused; T.J. Buckley, 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 the Clerk of Circuit Court. The minutes from the January 27, 2009 were reviewed. It was moved by Todd Bevan and seconded by Chris Fogal to approve the minutes from the January 27, 2009 meeting; and upon roll call motion carried unanimously. II. PRESENTATION OF QUARTERLY INVESTMENT REPORT The Finance Director presented the quarterly investment report for St. Lucie County for March 31, 2009. The Finance Director informed the Investment Committee that the County no longer had monies with the Florida Local Government Investment Trust. It was liquidated in early March. The money had been transferred to the long term investments and also CD holdings. She informed the Committee that as of March 31, 2009 there was $41,500,000 in CD’s. As of today we have $47,000,000. She outlined the banks currently holding the CD’s. She informed the Committee that they are all Qualified Public Depositories. She stated that there was $176,000,000 currently with JP Morgan and managed by Bear Stearn. She informed the Committee that Bear Stearn was moving out of JP Morgan and will start to operate under Hightower securities. She informed the Committee that they needed to be added to the authorized Broker Dealer list. 1 The Finance Director informed the Committee that all investments are in compliance with the Investment Policy III.PRESENTATION BY MONEY MANAGER – SAWGRASS David Furfine from Sawgrass introduced himself to the Committee. He stated that the County had funded the account back in May and at that time he felt that the Investment Policy was very safe and so restrictive that they would not be able differentiate between the three Money Managers. He stated that due to the economic turn around the soundness of the County’s Investment Policy served the County well. He stated that the County had earned 5.3% since inception. The County started with 35 million dollars back in May and another 10 million dollars in March, 2009. The total funds invested are 46.9 million dollars. He outlined the fixed income performance for the Quarter ending March 31, 2009 and One Year ending March 31, 2009. He stated that right now their suggestion is to shift as many agencies and the non-treasuries, as the Investment Policy will allow, to a longer term to maximize the contribution and keep the treasuries at the shorter end. He outlined the financial crisis of 2008, the existing California home sales and the existing Florida home sales. He recommended adding some credit risk into the portfolio and amending the Investment Policy to allow high quality short Corporate Bonds. He advised the Committee that Corporate Bonds help the overall return. Chris Fogal suggested waiting until there is a change in the market. Howard Conklin asked if any other governments were investing in Corporate Bonds. David Furfine stated the City of Jacksonville, City of Ocala and the City of Altamonte Springs. He informed the Committee that these governmental entities all had similar Investment Policies as St. Lucie County. Chris Fogal stated that the graph lines would go up and down over the next 6 months. He stated that it is the citizens of the County that we need to worry about. 2 David Furfine stated that right now we need to keep a shorter benchmark. He informed the committee that right now the benchmark is 2/3rds rd Treasuries and 1/3 Agencies. He stated that the next two trades would be coming out of the Treasuries. Todd Bevan asked if the Agencies were primarily Fannie Mae’s and Freddie Mac’s. David Furfine stated that as of March 31, 2009, 14% were Fannie Mae’s and 16 ½% were Freddie Mac’s. Todd Bevan asked if the Freddie’s and Fannie’s had the same yield as the Treasuries. David Furfine stated they actually had a better yield than the Treasuries. He reviewed the current portfolio holdings as of March 31, 2009. Howard Conklin asked what the management application on the maturities was. He asked if they were held to maturity or if they were traded early. David Furfine stated that they did both. Howard Conklin stated that the Investment Committee was looking at extending the CD maturity to 5 years. David Furfine recommended considering Corporate Bonds with limitations. Howard Conklin stated that the other two Investment Managers had recommended some changes to the Investment Policy, which had been incorporated to the policy. He requested any suggestions that Sawgrass might have to improve the yield. David Furfine stated that he liked the one to five year term. He did not understand why it was extended to 5 ½. He stated the first move would be to consider the Corporate Bonds with limitations. Howard Conklin asked if the rates, over the next year, would be flat or if they would start to escalate. David Furfine stated that he felt they would stay flat until the one day they go up. 3 Howard Conklin asked which of the government clients is getting the best return. David Furfine stated the City of Ocala. He stated that they have AA Corporate Bonds. Chris Fogal stated that we are in a situation now that we have no historical precedence. He stated the effects of what has happened to the economy will not be measured for years. The retailers are going to have the greatest problem. Howard Conklin asked David Furfine his opinion on the State Board of Administration. The Finance Director informed the Committee that there was 5.78 million left in the B Fund at the State Board of Administration. David Furfine stated that he had not heard anything about the B Fund. He stated that there were still about 4 or 5 line items still locked up. He informed the Committee that the State Board of Administration was taking to much risk without understanding the risks they were taking and doing it in a non profit manner. The Finance Director stated that the distributions from the State Board of Administration, Fund B, will take 7 to 9 years. Todd Bevan asked if the State Board of Administration had done any communication on the total number of dollars that could potentially be lost. The Finance Director stated that what the State Board of Administration is telling the County is that the funds are marketed for 7 to 9 years maturity. Howard Conklin requested language to possibly incorporate into the Investment Policy for Corporate Bonds. The Finance Director informed the Investment Committee that 40% of the portfolio is in Treasuries and Agencies. She stated that there is about 20 million dollars in Treasuries and the rest is long term between the 3 money managers. She informed the Committee that there is 11% of the portfolio in CD’s below the 2 year mark. The rest of the money is in a liquid money market. Howard Conklin asked what the yield of the money market was. The Finance Director stated that is was about 0.38. 4 Todd Bevan stated that the cash flow during the year cycle goes up and down and that would have to be separated out from what would be long term. Chris Fogal requested information on the historical performance of Corporate Bonds over the last 5 or 6 years. Todd Bevan stated that with Corporate Bonds there is a credit risk. Howard Conklin asked David Furfine to provide the Finance Director with the number for the Ocala Finance Director so that she can obtain specifics on the Corporate Bonds. Howard Conklin asked if there had been any defaults with the Corporate Bonds. David Furfine stated not from any of their clients. The Finance Director asked David Furfine if they had any County customers with Corporate Bonds. David Furfine stated that he would check. Todd Bevan stated that the Counties would have more oversite than the cities and the portfolios are a lot smaller. He asked if it would benefit to have a shorter maturity term on Corporate Bonds. David Furfine stated that the shorter maturity would dampen the interest rate and the credit risk. Todd Bevan stated that if the County was to do Corporate Bonds he would like to see the maximum maturity of 2 years or less. Howard Conklin asked if their were any foreign government bonds. David Furfine stated yes. Howard Conklin asked if the yields were higher. David Furfine stated that the yields are higher. Howard Conklin asked for input from the Committee members and David Furfine on how frequently the Committee should meet with the Money Managers. It was the consensus of the Committee to meet with the Money Managers every 6 months. 5 IV.INVITE FLGIT AND FLORIDA SAFE FOR DAY TO DAY FUND INVESTMENT PRESENTATION ON THE NEXT QUARTERLY MEETING – POOL PORTFOLIO INTRODUCTION Howard Conklin suggested letting Florida Safe run for another year before they ask them to come in and give a presentation. He recommended setting up a meeting with FLGIT. It was the consensus of the Committee to set up a meeting with FLGIT. V.ADDING FDIC INSURED CERTIFICATE OF DEPOSITS ON THE AUTHORIZED INVESTMENT LIST Todd Bevan stated that you can not be a member of the Public Deposit program and then take a public deposit and not have it collateralized. It was the consensus of the Committee to not add this item to the authorized investment list. Howard Conklin suggested adding this to the next agenda. VI.INCREASE CD MAXIMUM ALLOWABLE TERM FROM 2 TO 5 YEARS Howard Conklin stated that there is a danger of going out long term. The Finance Director stated that this was a request from the banks. Howard Conklin stated that even if the Committee authorizes this, it does not mean that the County would have to go out that long. The Finance Director stated that this would just add a little more flexibility. Sometimes the yield is better on a 25 month CD opposed to the 24 month CD. It was moved by Howard Conklin and seconded by Todd Bevan to approve the increase in the maximum allowable term for CD purchases and upon roll call motion carried unanimously. VII.ADDING HIGHTOWER SECURITIES, LLC ON BROKER/DEALER LIST The Finance Director explained to the Committee that the Money Market Group currently handling the day to day money market transactions is moving on to join HighTower Securities, LLC 6 Howard Conklin asked if it was going to be a problem getting them on the list. The Finance Director stated that she needed the recommendation to come from the Investment Committee. She also informed them that this item had already been added to the Board of County Commissioners agenda for April 28, 2009. Howard Conklin asked if there was any internal risk. The Finance Director stated that they don’t touch the money. Todd Bevan asked if these were Money Market Mutual Funds. He stated that the Government was still backing Money Market Mutual Funds. The Finance Director stated that it depends on what you buy. She informed the Committee that last year the County purchased a lot of reserve funds that were Prime AAA and the yield was quite high. It was under the recommendation of Bear Stearn that this was a good fund. She advised the Committee that sometime last March, Bear Stearn called and advised her to move the money out of this fund. She stated that a few months later the Reserve Fund broke the buck. She informed the Committee that the County still has some money with Federated Prime Cash Reserve Obligation Fund. This is a AAA Prime Fund. This is the money that we deposit with US Bank for the Money Managers. They move money in and out so they have to have a Money Market Fund. Chris Fogal asked for the rating on HighTower. The Finance Director stated that she did not know. This company is not handling the money. She outlined the current Money Market Funds. The Clerk of Circuit Court stated that they had met with HighTower Securities, LLC. and they are just managing the money. Chris Fogal requested a background on HighTower Securities, LLC as to their credibility. The Finance Director stated that there was information in the packet submitted by HighTower Securities. She stated that they are actually called Treasury Partners. She informed the Committee that there was a question and answer page provided. She informed the Committee that they also provided a letter of explanation, which was part of the Investment Committee packet. 7 Howard Conklin recommended obtaining a Standard and Poor’s report. VIII.COMMITTEE COMMENTS/RECOMMENDATIONS It was moved by Howard Conklin and seconded by Chris Fogal to have the Finance Director review the liquidity needs and get with the Money Managers to see if the County needed the money they could get it and to see if we can improve the yield yet maintain liquidity in the Money Manager Funds and upon roll call motion carried unanimously. Howard Conklin stated that this would open up a whole other added array of investment opportunities while still being able to have the liquidity. IX. SELECT DATE OF NEXT MEETING The next scheduled Investment Committee meeting is scheduled for July 20, 2009 at 8:05 a.m. X ADJOURN There being no further business the meeting was adjourned at 10:20 a.m. 8