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Quarterly Investment Update Publication
Volume VII Issue II, April 1, 2003Publisher:
Dorothy H. Wilken, Clerk .............................................................355-2996
Co-Editor:
Felicia Landerman, Investment Manager.........................................355-4412
Co-Editor:
Steve Nichol, Director of Communication.........................................355-6830
Contributors:
Arnfield Cudal, Investment Analyst................................................355-3458
Candace Mansfield, Cash Management Clerk...................................355-3643
Gail Whited, Investment Clerk......................................................355-4049
Lorie Clinger, Investment Secretary..............................................355-2906
Nancie Morrison, Exec. Admin. Ass't...............................................355-4621
Published at:
301 North Olive Avenue
West Palm Beach, FL 33401
INVESTMENT STRATEGY
A
s of March 31, 2003, the consolidated portfolio managed by the Clerk’s Finance Department was $1.481 billion and the overall book yield was 3.27 percent. The long-term fund balance was $1.092 billion with a book yield of 3.90 percent as compared to the Investment Policy Committee benchmark, the 12-month moving average of the two year Constant Maturity Treasury (CMT) yield of 2.23 percent. The short-term fund totaled $389 million and yielded 1.48 percent, as compared to its benchmark, the State Board of Administration’s Florida Local Government Surplus Funds’ yield of 1.47 percent.During the first quarter of 2003, we continued to use a dynamic approach to analyzing our pending cash flows given various assumptions to changes in interest rates. The U S economy is currently quite weak and the war in Iraq has further weighed down all sectors of the financial markets. This has resulted in an environment where market yields continue to remain at forty-year lows. One of the challenges has been to remain defensive in our investment approach – meaning to position ourselves for an eventual rise in interest rates - while still to maximize performance.
Our investments are prepared for interest rates to remain near their lows for the duration of the fiscal year. Short duration callable U.S. Agency notes are providing good relative returns while limiting extension risk, due to their short stated final maturities. Both fixed and variable rate U.S. Agency mortgage products are providing principal and interest cash flows on a monthly basis to provide flexibility to respond to higher rates if the economy takes an upswing. These types of investments not only provide enhanced returns over their bullet (fixed-maturity) counterparts, but also provide improved performance in a static or rising interest rate environment.
During the period, we also continued to closely monitor the prepayment exposure of the premium mortgage holdings. We identified certain
premium mortgage pools that were prepaying faster than normal and sold them to capture gains. We reinvested the proceeds into assets yielding higher than the yields sold, and accomplished this with minimal effect on our overall duration. This allowed us to fully utilize the efficiency of the markets.We will continue to perform in-depth analyses of fiscal year 2003 estimated cash flows, measured against shocked movements in interest rates, to ensure a balance against our pending monthly liabilities. Cash balances continue to remain at comfortable levels on a monthly basis to defend against the possibility of rising rates and to provide further cushion to fund monthly liabilities.
DOROTHY H. WILKEN
Clerk to the Board of County Commissioners
4th
Quarter Investment Update
- Consolidated Portfolio Distribution
- Historical Yield Comparison
- Treasury Yield Curve
- Key Interest Rates
- Investment Strategy Update
- Economic Update
- Read the Report in its Entirety
Finance Department:
Finance Department Minutes Division 3rd Quarter Report FY 2002 4th Quarter Report FY 2002 1st Quarter Report FY 2003 2nd Quarter Report FY 2003
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