Public Trust Advisors Blog

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

Methods of Asset Valuation: A Comparison

Posted on Fri, Apr 21, 2017

 

The Valuation Showdown: Mark-to-Market vs Amortized Cost

Chess Match-1.jpgInvestment advisors, like Public Trust Advisors (Public Trust), may select different methods of determining the value of assets held within local government investment pool (LGIP) portfolios for reporting purposes.

The two most common methods used to report on the assets of the portfolio are mark-to-market and amortized cost...So which is better? While both methods are acceptable, in our opinion mark-to-market (Fair Market Value) provides a higher level of transparency than amortized cost.

Why Mark-to-Market?

Public Trust has chosen to use the mark-to-market methodology for LGIPs managed. This methodology involves obtaining prices for securities in the portfolio on a frequent or daily basis. In the case of the Public Trust managed LGIPs, the portfolios are priced every business day. (Note: mark-to-market can be performed multiple times a day if deemed necessary by the fund manager). The prices are based on what a willing buyer would pay to a willing seller for the individual positions in the portfolio. Public Trust, in its role as administrator, believes that this information is exceptionally useful to both the investor and investment manager. When completed routinely and while using prices from reliable sources, readers of the financial statements gain an understanding of the liquidity and credit quality of the positions in the portfolio. Mark-to-market reflects current economic and monetary cycles which may have a direct impact on the underlying values of the portfolio. Changes in the rating or perceived credit quality of the insurer will also be immediately reflected in the value of the securities held in the portfolio.

Alternatively, LGIPs employing the amortized cost method adjust the value of the securities in the portfolio daily by a predetermined amount from the purchase date to the maturity date. This method produces very predictable asset valuations regardless of current economic or monetary cycles. The predetermined value may or may not reflect the actual price achievable in the open market. As a result, many LGIP portfolios which utilize the amortized cost method will still use mark-to-market periodically to more accurately reflect the actual prices. 

Mark-to-Market and Transparency

While amortized cost and mark-to-market can approximate one another during periods of stability in the financial markets, the results can be much different during times of stress (take for example, the financial crisis of 2008). Most LGIPs maintain sufficient cash to meet investors’ request for funds, however uncertain cash flows can happen and are more likely to develoiStock-153711706.jpgp during times of economic uncertainty. At any given time, the investment manager may need to sell individual securities in the open market. Mark-to-market methodology allows both the participant in the LGIP and the investment advisor to determine the possible gain or loss to be realized from selling the securities in the portfolio. We believe that the mark-to-market methodology gives the users of the financial statements a much better understanding of the structure and quality of the portfolio.

At Public Trust Advisors, we believe that transparency is a critical component of the investment of all public funds, and mark-to-market is essential to that transparency. 

*All comments and discussion 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: fixed-income asset management, asset valuation, investment managment for the public sector, Investing Public Funds, LGIP Administration, mark-to-market, Public Trust Advisors

Save the Date - GFOA Kick-off Party

Posted on Thu, Mar 23, 2017
Save the Date.jpg
 
 
 
Join us for the biggest event of the year!
We invite you to a GFOA kick-off party
hosted by Public Trust Advisors. 


Join your colleagues from around the nation at Denver's Union Station (Main Terminal) for entertainment, appetizers, games, and drinks.
We encourage you to bring your families! 


When: Sunday, May 21, 2017

 6:00 - 10:00 p.m. 
 
Enjoy the band.jpgBlank Print Document - Untitled Page.jpeg
 
Enjoy Denver.jpg
 
Save Your Spot!

Tags: Investing Public Funds, Government Finance Officers Association, Denver, Union Station, May 2017, GFOA, Public Trust Advisors, Finance, Conference, investment managment for the public sector

FOMC Moves... Again!

Posted on Thu, Mar 16, 2017
 
March 16, 2017
 
The Federal Open Market Committee (FOMC) meeting concluded yesterday at 2:00 p.m. (EST). As was widely expected, the FOMC raised the target range for federal funds to 0.75-1.00 percent. This is the third 25 basis point increase in 15 months.
 
The FOMC "Dot Plot" released following yesterday’s meeting reflects the expectation of two more hikes this year followed by three additional hikes the following year. The FOMC statement noted that “in view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 0.75-1.00 percent.” 

“The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate” the FOMC said in its statement and reiterated that “with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around two percent over the medium term.” The next FOMC meeting will be on May 3, 2017. At the present time, the market is not expecting another rate hike at that meeting.
 
Investment management services for the public sector
*Source: Bloomberg 
 
 
Disclaimer: This communication is for informational purposes only. All information is assumed to be correct but the accuracy has not been confirmed and therefore is not guaranteed to be correct. Information is obtained from third party sources that may or may not be verified. The information presented should not be used in making any investment decisions and 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. All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Tags: federal open market committee, Federal Reserve, FOMC, investment managment for the public sector, LGIP Administration, The Fed, Public Trust Advisors, LGIP Rates, Investing Public Funds, Safety and Liquidty

Celebrating Five Years

Posted on Wed, Feb 22, 2017

Public Trust Celebrates Five Years of Service

Public Trust Advisors™ (Public Trust) investment management services for the public sector is celebrating five wonderful years of service and operation with the help of loyal Participants within eight (8) local government investment pools (LGIP)! Since 2012, Public Trust has been meeting the investment and/or administration needs of various local government entities, now totaling over 3,600 Participants nationally.*

We are growing together! It is thanks to the vision of the governing boards and the loyal and growing participants of the Public Trust-managed LGIPs that we have experienced exponential growth since 2012. As of January 31, 2017, Public Trust manages and/or administers LGIP assets totaling approximately $18 billion* across the eight LGIPs, comprised of eleven funds. Year-over-year, the firm has grown from just over $10 billion in LGIP assets under management and administration (January 2016) to $18 billion (January 2017), a total growth of 78%.

Returns vs SP Chart 12-31-16-1.png

The number of Public Trust-managed LGIP Participants continues to grow each year, contributing to the success of all. As of January 31, 2017, total Participants for Public Trust-managed LGIPs reached 3,645!* That’s a growth of approximately 8% within the last year alone. Whether you’ve recently joined or have been a long-term Participant, your continued participation is what makes us all grow together.

For the past five years, Public Trust Advisors has made it a priority to offer high quality, cost-efficient LGIP investment management services that rely on
people, technology, and proven processesThe Public Trust LGIP Administration System, a new generation, LGIP specific back-office system, allows us to operate effectively and efficiently. Our LGIP Investment Advisory services are LGIP-specific, with credit and portfolio management working together to safely manage the public’s funds while finding value. The result? Higher investment returns for Public Trust-managed LGIPs. See Figure One for our performance against Standard & Poor's rating.

As yields continue to rise, 2017 is shaping up to be a year of continued growth for our Participants. Look for new services and enhancements as we all grow together. In the meantime, we would like to hear from you and invite you to learn more about Public Trust.

Pool Breakdown 2017-2.png 

 Need more information? Contact Us!

*Participants comprised of both funded and non-funded accounts. Of the $18 billion, $1.4 billion is administration only for one LGIP comprised of one fund. Data as of January 31, 2017. All comments and discussion 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. A 'AAAm' rating by Standard and Poor's is obtained after S&P evaluates a number of factors, including credit quality, market price exposure, and management. Ratings are subject to change and do not remove market risk. **The benchmark, the S&P US AAA & AA Rated GIP All 30 Day Net Yield (LGIP30D), is a performance indicator of rated GIPs that maintain a stable net asset value of $1.00 per share and is an unmanaged market index representative of the LGIP universe. The S&P benchmark utilized in this comparison is a composite of all rated stable net asset value pools. GIPs in the index include only those rated based on Standard & Poor’s money market criteria. Pools rated ‘AAAm’ provide excellent safety and a superior capacity to maintain principal value while those rated ‘AAm’ offer very good safety and a strong capacity to maintain principal value (source: Standard and Poor’s website). The comparison between this index and the portfolio may differ in holdings, duration, and percentage composition of each holding. Such differences may account for variances in yield.

Tags: LGIP, yield, safety, investment advisor, LGIP Administration, Investing Public Funds, local government investment pool administration, investment managment for the public sector

Subscribe via E-mail

Latest Posts

Posts by category