Portfolio Profile: Year-end Results
By Felicia Landerman, Investment Manager, Clerk & Comptroller
Palm Beach County’s consolidated investment portfolio continues to exceed expectations and finished the fiscal year at $1.74 billion. The current balance is $2.1 billion. The portfolio, which is managed by the Clerk & Comptroller’s office to maximize the earning potential of tax dollars and reduce the tax burden on Palm Beach County citizens, had an overall book yield of 5.17 percent as of September 30, 2007. This outperformed the Investment Policy Committee’s benchmark, which is the 24-month moving average of the 2-year Constant Maturity Treasury Index yield of 4.70 percent. During the year, the overall yield increased 41 basis points and investment income grew by 16 percent, from over $88 million to over $102 million.
Fiscal year 2007 began with a flat-to-inverted Treasury yield curve and a consensus for inflationary risk from the Federal Reserve. The Treasury yield curve has since steepened sharply in reaction to the subprime mortgage crisis and the weakening of the U. S. economy, with the biggest decline in interest rates occurring on the short-end of the curve, between six months and three years.
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During the fiscal year, the Clerk’s office implemented a strategy to position the portfolio for a decline in interest rates. These strategies included extending overall duration to 2.59 years and rebalancing certain securities to increase overall portfolio yield. As we move forward, the Clerk’s Treasury department will closely monitor cash flows, duration, yield, interest rate sensitivity and overall portfolio performance in light of the potential for further economic weakness and further declines in interest rates. In doing so, dynamic cash flow and optimization models will continue to be utilized.
Felicia Landerman is a Certified Treasury Professional and the Investment Manager for the Clerk & Comptroller’s office. She holds a Master’s degree in Business Administration.