Investment manager reports strong returns, committee weighs rule on selling securities at a loss

PMA portfolio manager Brian provided a market and portfolio update and told the Dodge County Finance Committee the county’s main operating portfolio is “in very good shape and returns have continued to be strong for the county.” He said the portfolio’s yield was 4.29% against a benchmark of 3.94% and that the operating account is a laddered, high‑quality 1‑to‑5 year portfolio with an average duration of about 2½ years.

The report said the county’s ARPA portfolio is being held short for spending needs (roughly 70% cash) and that adding corporates and agency mortgage‑backed securities had produced a modest pickup in yield (the presentation cited about a 35 basis‑point advantage versus an all‑Treasury benchmark). Brian described PMA’s process as research driven and largely buy‑and‑hold but said the firm retains the ability to trade when opportunities arise.

Committee members focused on whether the county should continue the informal practice of avoiding sales that would realize losses. A PMA representative summarized the approach the manager has used: “It was our strong understanding as we got started with this investing that we weren’t going to sell anything at a loss,” and asked if the committee wanted greater flexibility to sell at a loss when that trade could be offset by gains elsewhere.

Members raised accounting and public‑perception concerns, noting that GASB marking to market already affects reported statements and that realized losses can prompt board questions. Several members said they would be comfortable permitting limited, case‑by‑case sales — for example, selling a small percentage of the portfolio and seeking offsetting gains so monthly or quarterly reports do not show a realized loss. The committee did not adopt a formal policy change during the meeting; members directed staff and PMA to continue the conversation, bring potential trade ideas to staff (Chris) in advance, and revisit the topic at a future meeting.

The presentation also reviewed Fed outlooks and recent market moves; PMA said the Fed is likely to stay on hold until clearer economic data arrive and that expected rate cuts have been pushed out compared with earlier projections. PMA emphasized the portfolio’s diversification (treasuries/agencies, agency mortgage‑backed securities, corporates, municipals) and said realized and unrealized losses from the 2022–23 rate moves had mostly been managed by buy‑and‑hold positioning.

The committee asked for clearer monthly reporting that shows yield versus return and a return column versus the benchmark to make comparisons easier. PMA staff said they would provide that format in future monthly reports and continue to discuss potential transactions with county staff.