MANAGING INVESTMENT PORTFOLIOS WITH CONFIDENCE: FOUNDATIONS & - - PowerPoint PPT Presentation

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MANAGING INVESTMENT PORTFOLIOS WITH CONFIDENCE: FOUNDATIONS & - - PowerPoint PPT Presentation

Nov 06, 2023 215 likes •558 views

MANAGING INVESTMENT PORTFOLIOS WITH CONFIDENCE: FOUNDATIONS & FRAMEWORKS Sam Vaughan Vice President Financial Northeastern Companies April 16, 2019 PURPOSE HOW CAN WE PRUDENTLY MANAGE OUR INVESTMENTS TO MAXIMIZE INCOME, KEEP OUR FUNDS SAFE AND

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MANAGING INVESTMENT PORTFOLIOS WITH CONFIDENCE: FOUNDATIONS & FRAMEWORKS

Sam Vaughan Vice President Financial Northeastern Companies April 16, 2019

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PURPOSE

HOW CAN WE PRUDENTLY MANAGE OUR INVESTMENTS TO MAXIMIZE INCOME, KEEP OUR FUNDS SAFE AND PROVIDE FOR OUR CASH NEEDS?

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AGENDA

  • Identify our goals and limitations
  • Establish our infrastructure
  • Determine our cash flows
  • Transition from policy to plan
  • Communicate our process
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SUMMARY

  • We generally share the same goals and

limitations

  • Our infrastructure should work for us
  • Cash flow is the key to prudent investing
  • A policy is not a plan
  • We should be able to share our challenges and

successes with others

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AGENDA

  • Identify our goals and limitations
  • Establish our infrastructure
  • Determine our cash flows
  • Transition from policy to plan
  • Communicate our process
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GOALS

  • Safeguard principal
  • Provide for liquidity
  • Earn a reasonable market rate of return…with

a portfolio that is:

– Suitable – Marketable – Diversified

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LIMITATIONS

  • PFIA
  • Investment Policy
  • Risk!

– Concentration – Default – Market – Liquidity – POLITICAL

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RATE COMPARISON

7‐DAY YIELD 6‐MONTH 1‐YEAR 2‐YEARS 3‐YEARS TREASURY ‐ 2.31% 2.34% 2.28% 2.26% CALLABLE AGENCY* ‐ 2.37% 2.45% 2.50% 2.63% TAXABLE MUNI ‐ 2.33% 2.47% 2.45% 2.47% CD ‐ 2.35% 2.40% 2.50% 2.60% GOV POOL 2.47% ‐ ‐ ‐ ‐ PRIME POOL 2.61% ‐ ‐ ‐ ‐

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WHAT’S THIS ABOUT DIVERSIFICATION?

  • Various:

– Issuers – Maturities – Security types – Credit quality

  • The finished product of a well‐executed plan:

– Creates balance – Reduces risk – Enhances return

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RISK REDUCTION

  • Balance…risks are spread across:

– Issuers – Maturities – Credit qualities – Security types

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RETURN ENHANCEMENT

  • Various security types and credit qualities

– Changing yield spread relationships

  • Various maturities

– Changing yield movements – Changing yield curve

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AGENDA

  • Identify our goals and limitations
  • Establish our infrastructure
  • Determine our cash flows
  • Transition from policy to plan
  • Communicate our process
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INFRASTRUCTURE

  • Internal Controls
  • Custody
  • Investment Policy
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INTERNAL CONTROLS

  • Segregation of duties
  • Completeness of documentation
  • Compliance with laws and regulations
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CUSTODY

  • Accounting
  • Trade settlement
  • Cash management
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INVESTMENT POLICY

  • Define appropriate asset mix
  • Establish compliance with existing laws
  • Identify responsibilities
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AGENDA

  • Identify our goals and limitations
  • Establish our infrastructure
  • Determine our cash flows
  • Transition from policy to plan
  • Communicate our process
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CASH FLOWS – ONE IDEA

  • Total investment portfolio

– Liquidity portfolio

  • Primary
  • Secondary

– Income portfolio

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LIQUIDITY CHECK – FINDING “NORMAL”

  • Largest monthly deficit:

– Past 12 months – Pas 36 months

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LIQUIDITY CHECK – FINDING YOUR “PERFECT STORM”

  • Lowest Fund Balance (previous 12‐36 months)
  • Largest disbursement
  • Lowest revenue collected
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AGENDA

  • Identify our goals and limitations
  • Establish our infrastructure
  • Determine our cash flows
  • Transition from policy to plan
  • Communicate our process
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FROM POLICY TO PLAN

  • Determine a suitable risk tolerance
  • Define a management style
  • Create an investment plan
  • Construct the portfolio
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RISK TOLERANCE

  • Ability to take on risk
  • Willingness to take on risk
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MANAGEMENT STYLE

  • Passive

– Liability Matching – Ladder – Barbell

  • Active

– Defensive – Opportunistic

  • What is our outlook?
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YIELD CURVE ANALYSIS

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THE PLAN

  • Adapt rulebook to playbook

– Is it realistic? – Is it dynamic?

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THE PORTFOLIO

  • Allowable investments
  • Need for diversification
  • Infrastructure in place AND translated to a

plan of action

  • Cash flows are known
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AGENDA

  • Identify our goals and limitations
  • Establish our infrastructure
  • Determine our cash flows
  • Understand our investment choices
  • Communicate our process
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Communicate

  • Safety, Liquidity, Yield
  • Portfolio perspective
  • Benchmark
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1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 2.20% 2.40% 2.60% 2.80% APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR 2 YR 1 YR 6 MO PRIME 3 MO FED FUNDS GOV

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SUMMARY

  • We share the same goals and limitations
  • Our infrastructure should work for us
  • Cash flow is the key to prudent investing
  • A policy is not a plan
  • We should be able to share our challenges and

successes with others