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Lake County hears portfolio review showing large cash balance and rising yields
Summary
An outside adviser reviewed Lake County's investment portfolio, reporting $298 million in cash (including bond proceeds), a $279 million securities portfolio with a 3.7% weighted average yield and reinvestments earning roughly 4.59%. No formal action was taken.
Eileen Stanek, an adviser from Demeter Public Funds, told the Lake County Investment Advisory Committee on Jan. 9 that the county ended the year with a large cash position and improving yields.
"At year end, we ended the year with 298,000,000 in cash," Stanek said, adding that when bond proceeds and engineering/utility funds are excluded the cash balance is closer to $115,000,000–$120,000,000. She said the securities portion of the portfolio totaled $279,000,000 and carried a weighted average yield of 3.7%, up from 3.45% the prior quarter.
The presentation laid out why yields have risen: Federal Reserve actions in 2024 and market responses pushed short- and medium-term Treasury yields higher, and maturing, lower-yielding holdings have been reinvested at higher rates. Stanek said funds that matured last quarter were reinvested at an average yield of 4.59%, a level she described as "accretive to the yield." She also reminded the committee that Demeter advises a broad set of public-entity clients nationally.
Treasurer Zernan highlighted that roughly $120,000,000 of the reported cash balance is tied to safety service center bond proceeds that must be held to make upcoming payments. "There is about a $120,000,000 included in that figure for cash which is directly from safety service center bonds, which we need to hold in that position for payments," Zernan said.
Commissioner Beveridge praised the committee's timing on reinvestments, noting that many maturing bonds can now be rolled into longer-term holdings at higher yields. "Now is the right time for reinvestment," Beveridge said, adding that the portfolio was positioned well to lock mid-4 percent yields for about five years based on current market rates.
Stanek and committee members discussed the Fed's policy outlook, inflation trends and labor-market indicators that are affecting yield curves and reinvestment decisions. The presentation noted that the adviser oversees advisory work on roughly $155 billion in public-entity assets nationwide (figures reported as of Dec. 31, 2023) and that expectations for 2025 included the possibility of one or two Fed rate cuts.
The committee did not take formal action on the presentation during the meeting; the report was presented and discussed.
