April 19, 2007
1:30 P.M.
Members in Attendance:
Edward J. Leonard, Franklin County Treasurer
Ken Wilson, Director, OMB – representing Commissioner Brooks
Zach Talarek - Budget Analyst, OMB – representing Commissioner Brooks
John Wolf, Director, OMB-FCCC – representing Clerk John O’Grady
Guests in Attendance:
Dennis Yacobozzi – President, United American Capital Corporation
Kevin Klingel – Vice President, United American Capital Corporation
Aaron Martini, Investment Officer, FCT
Treasurer Leonard called the meeting of the Franklin County Investment Advisory Committee (IAC) to order at 1:30 p.m.
Recap of the Strategy & Economic Outlook Report by the Investment Advisor –
Mr. Yacabozzi of UACC
Representatives of United American Capital Corporation (UACC) were retained on April 6, 2007, as the County’s Investment Advisor. They were active as consultants during the first quarter 2006 and most of 2005, and were part of the strategic moves the investment staff made; now the meetings will go forward on a calendar basis.
UACC reviewed the first quarter portfolio reports of the core portfolio, which included an inventory of portfolio assets, investment activity, and realized income for the quarter. Also included were graphic illustrations depicting the portfolio’s asset composition, maturity analysis, and a comparison of the Treasury yield curve (March 2007 versus December 2006). The firm indicated that all investments made during the quarter are in full compliance with Chapter 135.35 of the Ohio Revised Code and the County’s approved investment policy.
UACC pointed out that the average weighted yield of the core portfolio should continue to increase throughout fiscal 2007. Securities yielding over 5% (purchased over the past several months), coupled with the reinvestment of maturing investments from earlier years, is a factor for the continuing increase in portfolio earnings. However, a successful investment strategy of lengthening the portfolio’s average duration during 2006 is a primary reason for the continued earnings performance.
UACC also discussed current economic conditions. The firm indicated that the economy continues to grow, but at a slower pace. Although the Fed continues to evaluate factors relating to inflation, market consensus does not expect any change in the Funds rate for most of the year. Interest rates across the 1-5 year curve are expected to decline further, creating the likelihood that the Fed may cut the Funds rate during the third or fourth quarter.
The economy will continue to grow but at a slower pace. The Fed Funds rate is expected to remain at 5.25% for most of this year. Interest rates across the 1-5 year curve are expected to decline further, creating the likelihood that the Fed may cut rates during the third or fourth quarter. Absent a rate cut by the Fed, the 1-5 year yield curve will likely remain inverted during 2007.
The core portfolio’s current average duration should be maintained. The portfolio will continue to maintain a large liquidity position to capture the highest yields in the market while assessing the option to increase purchases of longer maturity securities.
Review of Portfolio Asset Allocations –
Aaron stated that the allocations had changed some from last month. Many of our callable securities were one-time call structures. The one-time call date has passed which means they converted to a fixed rate structure so we updated that. We have quite a lot of the fixed rate structure in the portfolio, accounting for 33% of total assets.
Current State of Portfolio Earnings –
- Income in March - $3,577,478.23
- Income YTD 03/31/07 - $9,968,735.97
Income Projections
- Investment income projections for 2007 - $32,472,000.
Treasurer Leonard added that the Treasurer’s Office is moving towards a truer custodial account where we actually have funds on account with a custodial bank. Currently, security purchases are being made through the main depository account. The new proposal would be to put money on deposit with the custodial bank and do the transactions through the custodial account and if there is ever a need the office can transfer funds from main account to the custodial account. This means less bookkeeping work would have to be done on the main account.
Another future item is the Bond proceeds that will be coming in – setting up another safekeeping/custodial account to mark that money for the short term. Ken Wilson indicated that the first amount of money would be coming in mid-June - Second offering 60-90 days after June.
Treasurer Leonard said the office would be putting out an RFI to hear from the various banks. Mr. Klingel gave a review of the core portfolio summary chart stating that the average duration was roughly two years. That is only the core portfolio – does not include all cash equivalents, savings accounts, CDs, etc; those are being managed by Aaron. UACC segregated all the assets that were originally purchased beyond the one year maturity. The core is just shy of $400 MM of the grand total.
Mr. Wilson noted that Mid-Ohio Regional Planning Authority (MORPC) has their building for sale. Once sold, the proceeds of the sale would be held in a separate account – MORPC is looking for predictability on long term period because they would have to pay rent off the interest on the long term. This matter will be discussed further at the next meeting.
With no further discussion, Treasurer Leonard set the proposed date and time for the next meeting to be July 19, 2007 at 1:30 p.m. He adjourned the meeting at 1:55 p.m.
Submitted by Janet Brown
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Holdings
