CapTrust tells Sun City West board reserve portfolio is 90% fixed income; Q1 up after unrealized losses

Carol Romney, relationship manager for investment adviser CapTrust, told the Sun City West Governing Board on May 9 that the association’s reserve portfolio is invested about 90% in fixed income and about 10% in equities and that the portfolio produced a positive net investment return through the end of March.

Romney said the portfolio began the quarter at roughly $28.7 million and that net investment return for the quarter was about $647,000, putting the portfolio near $29.0 million. She described the portfolio as managed to the association’s FI‑12 policy and said “the bond aggregate…was up 2.8%,” which drove much of the quarter’s performance.

The CapTrust presentation emphasized drivers of fixed‑income performance: moves in interest rates and credit spreads. Romney told directors that in late March, interest‑rate declines pushed bond prices up, helping returns in the short run. She said the portfolio’s performance through March was “up, 2.25%” year‑to‑date and that the account is “still a positive, net investment return” since inception.

Cliff Swan, the association’s chief financial officer (participating remotely), told the board that April had been “a rough month for stock, but good for you all” because the portfolio is bond‑heavy. Swan said April’s net effect was modestly favorable — “about $30,000 favorable” on aggregate valuation and yields that, in his words, “crossed over a hundred thousand,” producing approximately a $1.2 million annualized run‑rate yield on the $31 million scale CapTrust referenced.

The board asked about cash and liquidity. Romney said the association maintains a separate near‑term cash reserve — about $2.3 million — invested in low‑risk cash equivalents and short‑term Treasuries for funds that may be used in the next few years. She explained that “preserving for the medium term would mean you can take on a little bit more risk” and that long‑term preservation may include some equity exposure to keep pace with inflation.

Directors raised several operational questions about implementation and composition. Director Chapman asked whether the advisor invests directly in individual T‑bills or in bond funds; Romney said the portfolio uses ETFs and mutual funds for diversified, low‑cost exposure that can include treasuries rather than holding only direct T‑bills. Director Rhodes praised the investment approach: after the large unrealized losses of early 2022, Rhodes said the board’s decision then “to steady the course, hold your breath” had been validated by the recovery.

Romney said CapTrust provides a monthly “flash report” to the Budget and Finance committee and full quarterly reviews to the board. She also told directors the firm rebalances the portfolio when volatility moves it outside tolerance bands (typically a 5% band from policy targets) and will act quarterly or when policy tolerances are breached.

The presentation closed with board members thanking CapTrust and staff; no formal action was taken at this time on the portfolio itself. Directors used the briefing as background for a separate agenda item proposing changes to the association’s investment policy (FI‑12).