1. Florida Local Government Investment Trust
Annual Florida Trust Seminar
1:30PM – 2:20PM
Presenter: Faye Henry

2. Florida Local Government Investment Trust Annual Florida Trust Seminar
Introduction – Economic Update for City Treasurers
Who am I?
BSc
MA – Economics
CPA, CTP, CFE, CGMA
Training and Experience
Internal Audit – Insurance Investments
Assistant Treasurer – P&C Insurance
Treasurer – City of Delray Beach, City of Port St Lucie

3. Florida Local Government Investment Trust Annual Florida Trust Seminar
Presentation
Brief overview of investing public funds (5)
Cash forecast and how it is used, results (15)
Economic indicators and how they are used to update the investment strategy (15)
Update of economic indicators (15)

4. Florida Local Government Investment Trust Annual Florida Trust Seminar
Investing
The pillars of investment management in the public sector are:
Preserve principal (inflation)
Safety (risk mgmt.)
Returns

5. Florida Local Government Investment Trust Annual Florida Trust Seminar
Best practice suggests that one should have more than one portfolio
Cash – completely liquid
Enhanced Cash – up to 365 days
Bond – up to 5 years

6. Florida Local Government Investment Trust Annual Florida Trust Seminar
Types of investment styles are:
Passive - laddering
Active – using investment portfolio management detailed below
We use a combination of active and passive styles
Diversification – limit amounts in each category – Corporate, Federal …
Individual name and sector maximums
Company and market reviews

7. Florida Local Government Investment Trust Annual Florida Trust Seminar
Key tools in investment management are:
Cash forecast – daily, weekly, monthly, quarterly update
Investment policy – annual updates
Investment strategy – quarterly updates

8. Florida Local Government Investment Trust Annual Florida Trust Seminar
Poll question:
How many of you update your cash forecast on a daily or weekly basis?
How many of you engage in active vs passive portfolio management?

9. Florida Local Government Investment Trust Annual Florida Trust Seminar
Here is what we do
on a daily basis I update the cash forecast and on a monthly basis, I also update the cash flow projections for the next 90 days based on the activity from the rolling 12 months. My adjustments are biased, meaning, I exclude one time or other extraordinary items.
We also use the cash flow to determine our term investments.

10. Florida Local Government Investment Trust Annual Florida Trust Seminar
Excerpt Cash Forecast – shows that we are almost breakeven and only need to contribute bond payments.
Thus, bond payments for the year are invested in term investments that mature on the bond payment dates.
Description
Amount
Average Inflows (revenue sharing, deposits)
$23.8 Million
Average Outflows (not considering bond maturities and bond payments, considering check clearing)
$20.3 Million

11. Florida Local Government Investment Trust Annual Florida Trust Seminar
Liquidity – what is it?
It is making sure there are sufficient funds to pay current liabilities
Can we manage liquidity and make positive returns for our municipality
Yes

12. Florida Local Government Investment Trust Annual Florida Trust Seminar
By using the cash forecast and the specifics of how our municipality receives it funding.
Example, from the cash forecast, we manage the:
Bank balance in the operating bank account
Investment balances in the investment pool accounts
Bank balances in other money market accounts
Term amounts to 365days

13. Florida Local Government Investment Trust Annual Florida Trust Seminar
We received most of our funding in December and January of each fiscal year and from the previous slide you see that we do not have a short fall in an average month.
In months where we have bond payments, pension contributions we will have a shortfall.
Shortfalls are moved from the enhanced cash accounts

14. Florida Local Government Investment Trust Sample Active Management – slide 14
When the funds are received, they are immediately invested in four investment pools (for further analysis)
Then, we still have treasuries earning less than 2%, thus, we review the maturities.
We make an estimation of the maturities for the upcoming year, that portion of the current year inflows is invested in the long term portfolio if these investments can be invested in vehicles earning greater that the current MMF rate (link to investment strategy).

15. Florida Local Government Investment Trust Annual Florida Trust Seminar
What is the end result?
More than double our short term investment returns
Increased our bond portfolio balance and coupon income by $500,000 per year

16. Florida Local Government Investment Trust
Place 9 months of earnings and bond balance here
2018 Bond coupons
$1.7 Million
2019 expected coupons
$2.2 Million

17. Florida Local Government Investment Trust Florida Local Trust Seminar
How do we work with other departments to achieve the returns?
Accounts payable – we pay bills on the due date
Payroll – reduced # of wires
Procurement – we pay pcard on the due date and invest funds up to due date
Started initiative to pay ACH, hopefully move to more innovative forms of payment in the future

18. Florida Local Government Investment Trust Annual Florida Trust Seminar
Bank relationships – how do we use them
Increase our MMF rates
See what new tools are out there, focus on payment systems
Cybersecurity
Business Continuity (wires, vendor payments)
Keeping abreast with technology

19. Florida Local Government Investment Trust Annual Florida Trust Seminar
Economic indicators – how do we use them
Update our investment strategy
For example, if you believe the current Bloomberg indicator that there is a 35% chance of a downturn, then, where should you invest?
If you also believe that we have a ‘crumbling’ infrastructure and coupled with the downturn prediction then, I update the strategy to buy defensive companies.
Groceries, power grids (and possibly blockchain technology)
On slide 14, I mentioned the budget for bond purchases, above is the strategy for purchasing these bonds.

20. Florida Local Government Investment Trust Annual Florida Trust Seminar
Poll question
How many of you use an investment strategy?

21. Florida Local Government Investment Trust Annual Florida Trust Seminar
Sample of investment strategy, update at least quarterly
Took the investment policy and along with market overview and S&P 500, came up with list of companies and I keep updating that list.
Give an example here – Microsoft and Walmart

22. Florida Local Government Investment Trust Annual Florida Trust Seminar
Reporting Issues
Quarterly
Discuss returns versus income with senior management
Managing and discussing unrealized losses and gains (with the current drop we should be seeing gains) – should we sell or not

23. Florida Local Government Investment Trust Annual Florida Trust Seminar
Survey of recent economic indicators – Bloomberg
Discuss most recent trends
What do I use – Inventories, currency strength, inflation, unemployment
Currency strength – are our exports too expensive
Are we seeing a pile up of inventories
New unemployment claims
Why important – for corporate bond purchases

24. Florida Local Government Investment Trust Annual Florida Trust Seminar
Excerpt Bloomberg - ECO

25. Florida Local Government Investment Trust Annual Florida Trust Seminar
Questions
Contact information