Public Trust Advisors Blog

An Insider's Perspective on Public Trust Advisors, LLC

Posted on Wed, Sep 13, 2017

We are pleased to feature a Q&A interview by Emmie Madison, Content Writer for Public Trust Advisors, LLC (Public Trust), with Portfolio Managers Neil Waud and Randy Palomba. We discussed their experience, the economic landscape, and managing local government funds.

Neil Randy Blog.pngQ: How long have you been with Public Trust, and overall how long have you been managing portfolios?

Neil Waud: I have been with Public Trust since the very beginning, and I have been investing cash since 2000.

Randy Palomba: I’m also fortunate enough to have been with Public Trust since inception, and I’ve been investing cash in the public sector for over 30 years now. Time flies!

Q: You’ve been working together for a while now, right? How long? What’s the team like?

Neil: Randy and I have worked together since July of 1995. For the past twenty plus years, Randy has been a mentor for me, always willing to share his thoughts and observations while helping me hone my craft. As the Public Trust team continues to grow, Randy’s guidance has fostered a culture that shares institutional knowledge while encouraging new ideas. By design, our trading desk is a lively environment where the team openly debates our investment strategy as we discuss the prudent management of our clients’ investable funds.

Randy: Neil and I have been working together for over twenty years if I remember correctly. We both started in Client Service roles and progressed to Portfolio Managers. We have a solid team that allows us to share ideas and execute trades that are the best ones for the clients we serve.

Q: You both are CFA® charterholders, so what does that mean?  Who else on your team is a current CFA® charterholder?

Neil: The Chartered Financial Analyst (CFA) credential is offered to investment professionals through the CFA Institute. To earn the CFA credential, candidates must demonstrate a firm grasp of portfolio management, various investment tools, and the ethical standards required as a professional. To become a CFA charterholder, you must pass three levels of exams that rigorously test your investment related knowledge. Once earned, you are encouraged to continue your professional development while holding yourself to the highest ethical standards.Neil Quote Blog.png

Randy: To build on what Neil said, Public Trust encourages everyone on the team to go through the program. We have three members of the team that have completed the requirements for CFA designation and have an additional four members of the team currently enrolled in the program working toward their designation.

Q: What is your overall strategy on investing on behalf of governmental entities?

Neil: The safety of public funds is always the primary objective when developing our investment strategy. An emphasis on high quality securities, diversification, and the minimization of volatility helps ensure our clients’ portfolios maintain an appropriate balance of safety and liquidity throughout market cycles.

Randy: Safety! Safety of principal and liquidity of funds. These are taxpayer dollars we are investing. It is extremely important to ensure these funds are invested safely and in compliance with governing legislation as well as the clients’ investment policies.

Q: Do you have anything you want Public Trust clients to know about how their investments are being managed?

Neil: Prudent investment management mandates a thorough credit analysis of the counterparties we lend to and strict adherence to our clients’ liquidity needs. Having met these requirements, we then focus on maximizing investment returns. While we work in a competitive landscape, at the end of the day we need to be mindful of the old axiom: “it is the return of your principal not the return on your principal that matters most to our Participants.”

Randy: I’m proud of the team we have assembled and the comradery we have in doing the best job we can for our clients. It’s a real team effort with everyone working together to produce a superior product for our clients.

Q: We’ve seen some changes in the market this past year. What is your take on the current market?

Neil: Since the November election, we have seen a shift in market sentiment. The initial optimism of deregulation, tax reform, and fiscal stimulus in Washington driving growth and inflation metrics higher has given way to the reality of a polarized political process that will take some time to unravel. For the past eight years, the U.S. economy has experienced relatively steady but unspectacular growth. While sufficient enough to tighten the labor market to pre-crisis levels, the growth has not translated into rising inflation. While the stock market continues to press towards new highs, inflation will likely need to rise for interest rates to push higher.

Randy: I’m happy to see the Federal Reserve begin to raise interest rates. I’m not convinced that the Fed will be as aggressive as its dot plot suggests. I’ve been doing this long enough to see interest rates go from double digits in the 1980s to practically zero for most of the last ten years. I hope we can see interest rates at levels that make sense for the earnings to once again become a budget item for local governments. The earnings on excess cash can be important to providing additional resources for governmental entities ultimately benefiting the taxpayers.


Q: So, what are your expectations for the next Federal Open Market Committee (FOMC) meeting in September?

Neil: The July FOMC meeting didn’t really tip its hand regarding another rate hike this year simply noting that inflation was still below its 2% target rate. However, the post-meeting statement did say the normalization of its balance sheet will begin “relatively” soon. I agree with most, interpreting this to mean that the Fed’s longer-term holdings will be addressed at the September meeting. As far as the next rate hike is concerned, inflation will likely need to rise for this to occur this year. If it happens at all, the December meeting makes the most sense at this point.

Randy: I believe the FOMC will announce the start of the balance sheet normalization process. I also think that it will keep the Fed funds target rate unchanged until we see some indication that inflation is heading back toward 2%. The FOMC has accomplished one objective by raising rates from the nearly zero level we experienced for several years. I’m not convinced the U.S. economy is ready for a two-year Treasury yielding 5%. However, I know that finance managers and savers would welcome that investment return.

Q: Anything else you’d like Public Trust clients to know?

Neil: I would like to thank everyone for their continued support of Public Trust and encourage Participants to reach out to the Portfolio Management Team with any questions you may have regarding the program. Having placed your trust in us, we want to always be available for you.

Randy: I have had a great career working with some very talented individuals in the public sector. I look forward to continuing to work hard with those individuals as well as the opportunity to work with some of the younger folks that are now entering the public sector. I’m thankful for all the great people I have met and have had the pleasure to work with over the years.

 

 

 

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: Local Government Investment Pools, Portfolio Management, FOMC, investment advisor, local government investment pool administration, Investing Public Funds, Managing Public Funds, Public Funds Investment, Public Trust Advisors

You're Invited to our ASBO International Kick-off Party!

Posted on Fri, Aug 25, 2017

        

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you to an ASBO International Annual Meeting and Expo kick-off party! 

Denver's Union Station-Main Terminal is the place to be Friday, September 22! Join us from 7:30 - 10:00 p.m. for a night of live music, appetizers, drinks, games, and raffles throughout the night! Print the 2-for-1 raffle ticket attached to your RSVP 
and bring it with you to the party! 

                                   Families welcome!

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Tags: Local Government Investment Pools, Investing Public Funds, Public Trust Advisors, ASBO, Association of School Business Officials, Denver

Don't Fight the Fed?

Posted on Fri, Jul 28, 2017

Four times a year, members of the Federal Reserve (the Fed) release their projections for economic growth, unemployment, inflation, and the underlying interest rate associated with these forecasts. This interest rate projection, known as the “dot plot,” serves as a guide of where the Fed expects to take interest rates over time. Whenever the Fed releases an updated set of projections, it has the potential to be a market-moving event. For this reason, the recent disparity between the Fed’s dot plot and what the bond market is actually pricing into the yield curve should be of particular interest to fixed-income investors.

The saying “don’t fight the Fed” implies that investors tend to fare better when their interests are aligned with that of the Federal Reserve rather than against it. However, the bond market continues to take a less positive view of the economy than the Fed. Unfortunately for those that set monetary policy, the market’s pessimistic view has proven to be a bit more accurate for some time now.

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To illustrate, in December of 2015 the Fed raised its target rate for the first time in seven years. From the Fed’s perspective, the rate increase was warranted by the steady improvement in the labor market and confidence that inflation would gradually rise towards its 2.0% target over time. Moreover, the accompanying dot plot projected four additional rate increases in 2016. However, the bond market wasn’t buying it.
 
Source: Bloomberg

As it turns out, financial conditions rapidly deteriorated in January of 2016. At the low point in February, the possibility of even one rate hike from the Fed seemed implausible. Ultimately, we did see one rate hike in late 2016. So much for that December 2015 forecast, but the truth is that a lot has changed since the early inception of the infamous “dots.”

When the Fed first released the dot plot in January 2012, expectations for rate hikes were priced far into the future. Now, every Fed meeting is assumed to be “live” where the decision to raise rates could occur at any time. The Fed’s message has been garbled at times, but it has stressed a desire to move away from time-based forecasts to analyzing the current economic conditions before acting. For example, the labor market has recovered to its pre-crisis level, and the Fed is keenly looking for signs of inflation before pressing on with further rate increases.

While probably wise to not “fight the Fed,” we must simply realize that these dots are not carved in stone. As before, the Fed is still a bit more optimistic, and we have seen two rate increases so far this year. According to the dot plot, one more hike is projected for this year, but the market based probability for another rate increase before year end is less than 50%. Just keep in mind that either position could be correct, as it all depends on the future performance of the economy and relative stability of the financial markets.

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: Federal Reserve, The Fed, Rising rates, Public Trust Advisors, Investing Public Funds, Dot plot, LGIP Rates, Short-term interest rates

The Down and Dirty of Cash Flow Analysis

Posted on Thu, Jun 22, 2017

Cash flow.jpg

Cash flow analysis, also known as cash flow forecasting, is an estimate of receipts and disbursements during a given period. When executed properly, it can lead to the optimization of investment choices while insuring liquidity needs are properly met. As experienced professionals in this area, Public Trust Advisors, LLC (Public Trust) is here for you and happy to help set you on a better course for your short-term investment needs via a well-thought-out cash flow analysis.

Below are some key points and recommendations regarding the creation of an optimized cash flow analysis model for your organization.

  • Managing liquidity is a simple but important function. It is important to make sure invested funds are properly managed.
  • Cash flow analysis and liquidity management are different but work well together.
    • Cash flow analysis serves as the basis for proper liquidity.
  • When creating a cash flow analysis model, ask yourself the following questions:
    • How much cash is available?
    • When will it become available?
    • How long will it be available?
  • The best format for you will depend on the size of your organization, the volume, and the complexity of transactions.
  • One of the most popular types is the annual forecast.
    • Others include monthly and weekly forecasts and project-based forecasts.

For more detail, please reference the Government Finance Review’s article “Liquidity Management Made Easy.” Finally, Government Finance Officers Association recommends the following six steps for a cash flow analysis. These steps are shortened for length, but you can read the full version here.

  • Create a pooled portfolio of operating funds across all funds excluding unspent bond proceeds.
  • Consider historical information and projected financial activity.
  • Compare cash flow results with projections and determine reasons for differences.
  • Make conservative assumptions on analysis and update them regularly.
  • Monitor cash positions daily to ensure sufficient liquidity.
  • Use an appropriate tool for conducting a cash flow analysis.

If you have any questions, please click here to contact a Public Trust investment professional in your area!


All comments and discussions presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information above is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. 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: Cash Flow Analysis, Safety and Liquidty, Investing Public Funds, Local Government Investment Pools, Public Funds Investment, Managing Public Funds, GFOA, Public Trust Advisors, investment managment for the public sector

You're Invited to the Big Party!

Posted on Tue, May 09, 2017

        

Please join us for a GFOA kick-offgfoa.png
party hosted by
Public Trust Advisors!
 

Denver's Union Station-Main Terminal is the place to be 
Sunday, May 21! Join us for a night of live music, games,
appetizers, drinks, a photo booth, and raffles throughout
the night! Print and bring the attached exchange ticket for
TWO raffle tickets. Families welcome!

 

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We are excited to see you while you are here for GFOA. Make sure to stop by our headquarters during your visit! Click here for more details. 

 

Tags: GFOA, Government Finance Officers Association, Local Government Investment Pools, Investing Public Funds, Public Trust Advisors

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