Public Trust Advisors Blog

Special Report: Crane Data Interview 

Posted on Wed, Jan 17, 2018

Crane Data Interviews Palomba and Waud of Public Trust Advisors on LGIPs

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We are pleased to present a special report from Crane Data, publisher of Money Market Intelligence that collects and distributes money market and mutual fund news, information, and data. Earlier this month, Crane Data met with two of the Public Trust Advisors, LLC Portfolio Managers, Randy Palomba and Neil Waud, to discuss the management of local government investment pools and their outlooks for 2018. Click below to read the full interview. 

 

Click Here to Read the Full Interview

 

Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Tags: Portfolio Management, Managing Public Funds, LGIP, LGIP Rates, The Fed, commercial paper, LGIP Administration, Local Government Investment Pools, Public Trust Advisors

Who is flying the plane? -- The Chinese Economy

Posted on Mon, Feb 01, 2016

By Todd Alton, Vice President, Credit Research

Who is Flying the Plane?  -- The Chinese Economy

When will China's economy begin to lift and fly high again and what is the market currently telling us about its airspeed and risk? With the glide path of China’s formerly high-flying economy already in the midst of a half-decade long decline in altitude, recent reports suggest drag is increasing and the country’s economic airspeed is slowing further. Indeed, 11 of 12 economists recently surveyed by Bloomberg suggested they did not anticipate a recovery in economic thrust until at least 2018. In fact, many believe the economy will experience further drag and loss of economic airspeed in 2016, with one group, Capital Economics Ltd of London, forecasting growth as low as 4.4% to end 2015, and declining further in 2016.

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As the Chinese economy has lost altitude, U.S. income markets have taken notice, below are some warning lights (red flags) in the market as well as some key areas of risk to limit or avoid:

  • Yields on Chinese bank commercial paper have risen at a faster pace than the underlying yield curve.
  • ABCP programs with Chinese banks as the issuer or guarantor are amongst the highest yielding in the ratings category – significant as yield is an indication of risk.
  • Bank commercial paper of countries heavily leveraged to the Chinese economy, such as Australia, is yielding more than their European and global peers in the A1+ rating category.

The Public Trust Perspective

Given the lack of Chinese government openness and economic transparency, the numerous questions surrounding financial reporting by Chinese companies and banks, coupled with the various economic forecasts of “further to fall”, Public Trust Advisors plans to continue avoiding this segment of the market. In addition, we intend to severely limit our exposure to its trading partners whose economies are heavily reliant upon the Chinese economy’s flight plan and cruising altitude.

For general background on China's economy and the global implications, read this article.

 

Tags: commercial paper, safety, Investing Public Funds, public trust

Commercial Paper in the Public Funds Investment Marketplace

Posted on Fri, Jun 28, 2013

By Thomas D. Jordan, President, Public Trust Advisors

Putting Paper to Pen: Commercial Paper in the Public Funds Marketplace

 

 

In our space of public funds investing commercial paper (CP) is typically viewed as a short-term investment alternative. However, CP is important because it allows corporations to meet some of their short-term obligations such as payroll or short-term fundings in a way that does not break the bank. The fact is that most of the world has in some way benefitted from CP financing -- from filling up at a gas station, eating at a restaurant or observing a public works project, you can be assured that many of your experiences have been brought to you thanks to some type of CP financing.

Commercial paper, public funds investing

Traditionally commercial paper is the low-cost alternative to a traditional bank credit line. In many cases it is cheaper for corporations to rely on CP as opposed to accessing and drawing on their bank’s line of credit allowing established corporations with high credit ratings a cheaper funding source. Either way, CP can enter the marketplace through a broker, while direct CP issuers (often financial or banking companies) are able to directly access the market without using an intermediary.

Simply put, CP is akin to a home equity line of credit or a credit card designed for large financially stable companies. Sometimes these large, financially stable companies have money and sometimes they don’t, so going to the CP marketplace allows them to borrow money on a short-term basis with the understanding that it will be repaid with interest in the future.

Why is all of this important now?

CP makes a difference to corporations that fund their flow of goods & services and payrolls on a weekly/monthly/quarterly basis. It also makes a positive difference to the investors in the short-term, high quality money market arena, and when you add up all the benefits to the various sectors it is clearly good for the economy as it allows goods and services to reach consumers each and every day.

It also provides for and supports a free market economy; it is its transactional life blood. While the CP market ebbs and flows it can often be under considerable strain due to market volatility, money fund activity, and traditional investor appetites for product. Over time, and in the wake of the global financial crisis the volume of outstanding CP has been steadily reduced and now is often refinanced “daily” adding to the burden of those intermediaries that play the vital role in facilitating our free market economy.

Like any investment, there are risks, but when CP is properly understood and evaluated, a good credit team and a sound credit process can eliminate much of the risk.

To understand more about CP, and to hear more of our thoughts on the vital role it plays in our economy, please select the link below to download our free white paper “Commerical Paper (CP) De-Mystified".

 

 

Fixed Income Asset Management, Commercial Paper

Tags: public funds investing, commercial paper

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