Public Trust Advisors Blog

Top Economic Drivers of Increased Yield in 2017

Posted on Fri, Feb 23, 2018

We are two months into 2018 and experiencing steady growth from the prior year. Let’s look at the economic factors that impacted yields and recap a successful 2017. 

1. Three Federal Open Market Committee (FOMC) Rate Hikes

The Federal Funds target rate was raised three times (March, June, and December), starting the year at 0.50% to 0.75% and ending at 1.25% to 1.50%. The FOMC’s December dot plot indicated three potential rate hikes for 2018 based on the strength of the labor market and optimism that inflation will rise over the medium term.

2. Over Two Million Jobs Added in 2017

The unemployment rate dipped from 4.8% to 4.1% over the course of 2017. Non-farm payrolls added just over two million jobs in 2017, falling short of 2016’s growth but proving to be more than enough to put downward pressure on the unemployment rate and further tighten the labor market.

3. Stronger Economic Growth

The U.S. economy grew approximately 2.5% percent in 2017. Optimism regarding synchronized global growth and the impact of the Tax Cuts & Jobs Act have the markets optimistic that the U.S. economy can continue to grow at a healthy pace in 2018.

4. Positive Consumer Sentiment

Strength in the housing market, a tightening labor market, and record high stock prices have lifted consumer sentiment. With roughly two-thirds of the GDP derived from consumer spending, a healthy consumer has led to a healthy economy.

5. Low Market Volatility

With the FOMC striving for maximum transparency, the stock and bond markets remained remarkably calm over the course of 2017. Stability in the financial markets have made the FOMC’s job a bit easier (for now).

 


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. Performance comparisons will be affected by changes in interest rates. Investment returns fluctuate due to changes in market conditions.

Tags: Rising rates, Managing Public Funds, LGIP, Public Trust Advisors, FOMC, Short-term interest rates

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

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

The Down and Dirty of Cash Flow Analysis

Posted on Thu, Jun 22, 2017

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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

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