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

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

Investing Bond Proceeds: Part Three

Posted on Wed, Dec 28, 2016

Part Three: Other Considerations for Investing Bond Proceeds

Creating a successful bond proceeds reinvestment program starts with structuring a strategy that adheres to your governing documents and risk tolerances while simultaneously accounting for the ever-changing nature of your project and the market. 

Arbitrage Rebate: IRS regulations set forth in Section 148(a) of the Internal Revenue Code were enacted to keep public entities from issuing bonds for reasons other than their originally intent.  Arbitrage rebate regulations force any bond issuer to pay 100% tax on investment earnings of gross proceeds in excess of the bond’s arbitrage yield.  Here are a few items to consider:BP3.jpg

  • In general, paying arbitrage rebate is a good thing because it means that you have earned the maximum interest income allowed during your project.
  • Using a reputable arbitrage rebate compliance firm will help you determine your potential liabilities.

Municipal Advisor Rule: The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Exchange Act of 1934 to add a new requirement that “Municipal Advisors” register with the SEC.  The rule places a fiduciary obligation on those providing certain financial and investment advice to municipal entities.  Please also condsider the following:

  • You should not take advice regarding the investment of your proceeds from someone who is not a municipal advisor registered with the SEC.
  • There are some exemptions in regards to registering as a municipal advisor.
  • Exemptions include regisBP3a.jpgtered investment advisors; they already have a fiduciary responsibility.
  • Additionally, your underwriter should not be giving you advice regarding the investment of proceeds as it is outside their scope of work.
  • Finally, if broker dealers are not registered as municipal advisors, they cannot present investment advice but may provide information on securities they have available for purchase or sale.

Remember, prudent investment of your bond proceeds will help you work towards maximizing interest income over the life of your project.  The more you earn, the lower the overall financing cost of your project.

If you would like to speak with a PUBLIC TRUST ADVISORS™ public funds investment professional regarding bond proceeds management, please email info@publictrustadvisors.com and a local representative will be in touch. 

*The information presented should not be used in making any investment decisions. The presentation 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, and these assumptions may or may not be correct based on foreseen and unforeseen events. All calculations and results presented are for discussion purposes only and should not be used for making calculations and/or decisions. Any financial and/or investment decision may incur losses.

Tags: yield, Local Government Investment Pools, investing bond proceeds, fixed income management services, local government investment pool administration, LGIP, LGIP Operational efficiency, Investing Public Funds

Investing Bond Proceeds Series: Part Two

Posted on Wed, Dec 14, 2016

Part Two: Strategies for Investing Bond Proceeds in Today’s Environment.

The goal of investing bond proceeds is to maximize interest income over the life of the project; maintaining the safety and liquidity is always necessary when investing public funds. Due to the complex and ever-changing nature of bond project spending schedules, investment of bond proceeds can require a little more thought than the traditional investment account. 

Here are some strategies to consider when planning a strategy for the investment of your proceeds.

1. Invest Your Funds in a Local Government Investment Pool (LGIP) - If your project is short term in nature, LGIPs can provide both competitive yields and ample liquidity to satisfy your required draws.


2. Match Investments with Liabilities - Ideally, if you can match each investment with a corresponding draw from your draw schedule, you can attempt to optimize the amount of interest income for each specific draw.

Bond Blog 2.png
3. Combined Approach - Combining a multi-tiered approach utilizing both the LGIP and liability matched investment programs may provide the most strategic approach. A combined approach will allow you to utilize a LGIP for draws in the near future as well as unexpected liabilities and fixed income securities to match draws with a longer time horizon.

Bond Blog 2.1.png

The size, duration, and complexity of your bond project combined with the current investment environment play important roles in choosing a strategy for investment of the proceeds. The better you understand your project, the better you will be positioned to maximize interest income earned while investing the proceeds. Stay tuned for the final piece of the PUBLIC TRUST ADVISORS™ Bond Proceeds Series: Part Three: Other Considerations for Investing Bond Proceeds

If you would like to speak with a PUBLIC TRUST ADVISORS™ public funds investment professional regarding bond proceeds management, please email info@publictrustadvisors.com and a local representative will be in touch. 

*The information presented should not be used in making any investment decisions. The presentation 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, and these assumptions may or may not be correct based on foreseen and unforeseen events. All calculations and results presented are for discussion purposes only and should not be used for making calculations and/or decisions. Any financial and/or investment decision may incur losses.

 

Tags: investing bond proceeds, local government investment pool administration, LGIP operational efficency, yield, Investing Public Funds, fixed income management services, Local Government Investment Pools

What's the Latest in Local Government Investment Pools?

Posted on Tue, Nov 03, 2015

By Greg Wright, President and Matthew Starr, Vice President 

Change is constant in the local government investment pool (LGIP) space, here are some of the recent topics being discussed at Public Trust.

Still All about the Fed?

Were you amongst the optimists who thought the Federal Open Market Committee (FOMC) would make their interest rate move back in March?  If so, then surely you became convinced it was coming in September. Let down twice (or more) by our central bankers, now you are not sure when, or if, an interest rate increase will ever happen. We get it, budget planning is tough enough without the uncertainty surrounding interest rates and when the Fed might execute a 25 basis point increase in the fed funds target rate. Need more guidance?  Let us help, here is the latest Dot Plot in advance of the October 25th FOMC meeting. For a refresher on how to interpret, revisit our blog post from May 2015.

Source: Bloomberg

Public Trust Managed LGIP Rates are on the Rise!

Want some good news? We have some for you, LGIP rates have been increasing. Granted not at a 50-100 annualized basis points clip, but incrementally to the point some LGIP rates are starting to approach 2010 levels again. However, while interest rates are creeping up, these returns are nowhere near the pre-Great Recession yields, for that to happen, we need the FOMC to re-set the target rate.

In addition to the anticipated FOMC rate hike, there are also a number of other factors that impact LGIP rates:

  • Portfolio management style and approach
  • Investment policies
  • Management fees

In our opinion, another key element that promotes higher yields is Public Trust’s ability to operate with greater efficiency and maintain lower operating costs without sacrificing service (or safety). For more information on Public Trust’s approach to LGIP operational efficiency, read a recent white paper. These savings allow us to maintain a competitive management fee and better yields for our LGIP Participants.

Money Market Reform, Not for LGIPs

The United States Securities and Exchange Commission (SEC) Money Market Reform, slated to go into effect in October 14, 2016 will largely constitute a non-factor for the LGIP space.  Remember the SEC does not have purview over local government investment pools. The vast majority of LGIPs are created and operate in accordance with state laws. True there may be similarities in structure, valuation procedures, permitted securities, reporting and oversight between SEC registered funds and LGIPs, but come next fall, LGIPs will not migrate to a floating net asset value, like prime-styled (credit exposure) SEC registered money market funds. Under the reform, government-styled (100% government securities) funds can opt out of the floating net asset value requirement.

Are local government investors that use registered money market funds ready for the accounting requirements and cash-management changes that the new rules bring? Not familiar with new SEC Money Market Rules, read more here. Just remember this, come next October, LGIPs will remain stable dollar funds.

Transparency: LGIPs Reflect Client-Base

Transparency is a cornerstone of good government. Public Trust manages LGIPs and therefore, we need to operate in a manner that serves our clients’ needs. Maybe you have not taken a moment to consider the level of reporting and transparency associated with Public Trust managed LGIPs, well we have. Here is a quick, but important summary of the transparency-related reports available to all of Public Trust’s LGIP Participants via their websites as well as the reporting platform MYACCESS:

  • Daily Rates 
  • Monthly Statements 
  • Portfolio Holdings
  • Newsletters
  • Monthly Fund Analysis 
  • Information Statements
  • Annual Report 

We at Public Trust recognize that financial transparency plays a big part in the overall safety and security of your public funds. As an investor working on behalf of your community, it is essential that you receive a high quality service which can provide you with a variety of tools to assist in your daily responsibilities.  You aren’t allowed to keep secrets from your tax-payers, so Public Trust does not keep secrets from you!

Best regards,

Your Public Trust Staff

 

The views expressed within this material constitute the perspective and judgment of Public Trust Advisors, LLC at the time of distribution and are subject to change. Nothing contained herein should be construed as investment, legal, business, tax or accounting advice. You should consult your own advisors as to such matters and related matters concerning the information provided and its suitability for you. The information contained herein does not purport to contain all of the information that may be required to evaluate any investment options described herein. None of Public Trust Advisors or any of its affiliates make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and nothing contained herein shall be relied upon as a promise or representation whether as to the past, current or future performance. No representation is made as to its accuracy or completeness. It should not be construed as an offer or to purchase/sell any investment.Past performance is not an indicator of future performance or results. Any financial and/or investment decision may incur losses.

Tags: public funds investing, public funds investor, Public Funds Investment, Local Government Investment Pools, public investor, rating agency risk, Money Market Rules, Federal Reserve, LGIP Rates, Publc Trust Managed lgip, The United States Securities Exchange Committee, The Fed, local government investment pool administration, money market funds, financial transparency, LGIP operational efficency, investment advisory services, Investing Public Funds, LGIP Administration, public trust, federal open market committee, Safety and Liquidty, Public Trust Advisors, LGIP investment solutions, SEC, FOMC

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