Public Trust Advisors Blog

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.


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

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

What the Fed Said: Staying the Course...

Posted on Mon, Nov 03, 2014

By Neil Waud, CFA, Senior Portfolio Manager

Investing Public Funds: What the Fed Said - Staying the Course

The Federal Open Market Committee (FOMC) concluded its two day meeting last week. In the wake of recent volatility stemming from global growth and geopolitical concerns, the markets were bracing for the FOMC to take a more dovish tone when compared to the September 17th meeting. However the FOMC generally stayed the course by ending the QE3 program and noting significant progress in regards to the Committee’s long run goals of stable prices and a maximum rate of employment. The federal funds rate remains targeted at 0% to 0.25%, and will remain low for a “considerable time.” The stock market and bond prices were modestly lower after the announcement.

The vote today was not unanimous. Voting against today’s decision was Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, believing that the continued sluggishness in the inflation outlook warranted a continuation of the Fed’s asset purchase program.

 investing public funds, Investing Public Funds, public funds investing, public funds investor, public trust, safety, yield

Tags: public funds investing, yield, public funds investor, safety, Investing Public Funds, public trust

Investing Public Funds - Building the Public's Trust

Posted on Wed, Sep 10, 2014

By Thomas D. Jordan, Chief Executive Officer, Public Trust Advisors

Building the Public’s Trust:

In our opinion the word trust has gradually eroded and has diminished meaning among the public funds sector. The word "trust" can be overused by asset managers when discussing public funds investing and it is often under-delivered by the firms who claim it to be one of their “values.”

From our perspective, there is no value more essential to every aspect of our business than the trust we build with our clients. 

Trust is the prism through which public entities must evaluate fixed income asset managers to invest and manage public funds.

Fixed Income Asset Management

When evaluating a firm for the management of a local government investment pool or a separately managed account, it will quickly become apparent that there are a number of technically qualified fixed income asset managers and management services in the marketplace. Price, in the form of a firm’s management fee, is often the driver in the selection process, as is performance, track record, and the proposed scope of services. All of these “objective” elements can be procured from any number of asset management firms.

It is TRUST that sets us apart from the others. From relationships to customer service and from investment options to recommendations, trust is at the heart of all we do for you. 

You have our word, and on that we deliver.

Rates Change, Values Should Not

We believe that for many public entities, the relationship with their fixed income asset managers has been altered by the current protracted low-interest rate environment. Fee pressure can change the behavior of the firms engaged in public funds investing. Firm business models, predicated on the ability to charge the now unthinkable fixed income “50 basis point” management fees, can create dysfunctional relationships between clients and the investment management service provider. Client-first values can suffer, and quite possibly, have struggled during the recent economic down-turn. As time goes on, rates do and will change, however a firm’s values should not. At Public Trust we have built our business on that very premise.

Don’t Manage Trust, Build It:

fixed income asset management

For the team at Public Trust Advisors, building trust, through long term relationships with our clients, is key in all that we do, and it permeates our deeds and words. Public Trust was founded to address a void we perceived in the fixed-income asset management services sector focused on investing public funds. Public Trust was started to create a renewed sense of commitment to do what we deem is right for public sector marketplace including state and local government’s clients and the assets that we manage on their behalf. We believe our actions and the fundamental foundation of our company points to a higher purpose that resides in our mission statement:

The Public Trust Mission Statement: 

“To provide valued and trusted services to our marketplace in the manner we would serve ourselves and to create enduring bonds of trust between us and the clients we serve.”

We think fixed income asset managers have a duty to build a high-level of trust with their public sector clients. Here are ten easy steps to building trust between the investment service provider and public sector marketplace.

10 Steps to Building Trust with the Public Sector Investor


1)      Transparency:  Open dialogue. Alignment with your client goals and objectives.

2)      Sincerity: Say what you mean, mean what you say.

3)      Adding Value:  Have your client’s interest at heart.

4)      Respect:  Treat your client as you would yourself.

5)      Feedback: Welcome it, learn from it.

6)      Consistency: Committed in words and deeds to your clients.

7)      Responsibility: Mistakes happen, own them, learn from them.

8)      Expectations: Be clear and honest as to what you can deliver.

9)      Execution: Work to meet or exceed expectations.

10)    Word is Bond: Promises made are promises met.


Trust, Demand It: 

If you are a buyer of fixed income management services for the public sector, we believe that you are due a high-level of trust. Your fiduciary role in maintaining public funds is significant.  Beyond that, only with trust can an optimal working relationship exist that creates complete alignment between the public funds client and the fixed income management services provider. It is the mutual trust between the client and the fixed income manager that provides the quality investment management services that the client should not only expect, but deserves. 

Trust is not an option; it’s a long-term commitment to building value.

Tags: public funds investing, building trust, fixed income management services, fixed-income asset manager, Investing Public Funds, public trust

Subscribe via E-mail

Latest Posts

Posts by category