Shortly after taking office, County Executive
Junk bonds are obligations of companies with 'below investment grade' credit ratings and carry a significant level of credit and default risk.
The transfer to UBS greatly reduced credit and duration risk. The County no longer maintains interest in mutual funds that invest in junk bonds, derivatives, or any other speculative investment. The portfolio is limited to
In addition the transfer to UBS saved County taxpayers hundreds of thousands of dollars in annual fees. For example, in 2012, the County paid more than
Mutual funds carry another layer of fees, which cost the County hundreds of thousands of dollars per year. Those fees too were extinguished with the transfer to UBS as the County no longer invests in mutual funds but makes direct investments in the underlying fixed income securities. Doing so, lowers investment costs and provides greater transparency.
Contrary to the public comments of a few,
The following documents provide irrefutable evidence of the County's exposure to junk bonds, the annual investment management fees, Council notification, and the statutory authority of the County Executive and Chief Financial Officer to direct County investments.
2012 Year-end Financial Statement (http://www.scribd.com/doc/236504873/2012-YE-Financial-Statement) of account # 646-239XXX
* Both funds are assigned the lowest possible, one-star rating according to Morningstar and include junk bondholdings.
RiverPark Short Term High Yield Fund Prospectus (RPHIX (http://www.scribd.com/doc/236504930/RiverPark-High-Yield-Fund-RPHIX-Prospectus))which states:
* "Under normal circumstances, RiverPark Short Term will invest no less than 80% of its net assets in high yield securities, also known as "junk bonds" The fund may invest in securities of companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy and liquidation proceedings."
* As of
* "Up to 25% of the Fund's total assets, calculated at market value at the time of investment, may be invested in: (a) non-convertible debt securities that are not rated in the highest two grades by Moody's or S&P these debt securities may include "high yield" or "junk" bonds."
* As of
PIMCO Unconstrained Bond Fund Prospectus (http://pe.newriver.com/summary.asp?cid=PIMCOLL&cusip=72201M487&doctype=spro&oldurl=%2FRegulatory%2FExternal%20Documents%2FPIMCO_Unconstrained_Bond_SP.pdf)
* According to its "Principle Investment Strategies" section, at least 80% of the funds assets are invested in "Fixed income instruments of varying maturities, which may be represented by forwards or derivatives such as options, future contracts or swap agreements."
2012 Year-end Financial Statements (http://www.scribd.com/doc/236505126/YE-Financial-Statements-Fees) for the two reserve accounts, which list
* Account # 379-800XXX charged
* Account # 646-239XXX charged
* The combined investment management fees for 2012 were in excess of
* The majority of the investment fees were paid to a third investment management firm,
* Audio file of the presentation can be found HERE (http://councilaudiofiles.nccde.org/FinanceMeeting2013-11-26.wma)
* Current UBS Statement of holdings and credit ratings (http://www.scribd.com/doc/236505165/Current-Investment-Portfolio-Holdings-UBS)
* The County no longer has exposure to junk bond securities
* "Invest funds deemed by the Chief Financial Officer available for temporary investment in such obligations or in such a manner as the County Executive may authorize."
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