Board hears record Q1 investment earnings; lowers Q2 book‑return target

The Arkansas State Board of Finance was told that the state’s investment program produced a record quarterly result in the first quarter of fiscal 2025 and the board voted to modestly lower its near‑term target for book returns.

Steven Kilgore, the investment accounting director, reported that short‑term revenue for the quarter totaled $28,100,000 and long‑term ledger earnings contributed $74,800,000, citing mortgage‑backed securities and corporate bonds as the primary sources. Kilgore said the quarterly ledger total was about $101,000,951.

Ralph Romack, presenting the macroeconomic view for the board’s external managers, said Federal Reserve policy changes and market responses led staff to propose a lower target book‑return range for the October–December quarter. The board adopted a motion to set the new target range at 3.4%–3.5%, down from 3.5%–3.6%, by voice vote.

Board members discussed risks tied to future Fed cuts. An investment manager warned that additional Fed rate reductions could reduce portfolio earnings and noted the portfolio’s liquidity and size — the board was told the total portfolio is approximately $11.6 billion, with the long‑term portion near $9.5 billion.

The board also received a 12‑month forward cash‑flow projection of about $1.3 billion, roughly $400 million higher than earlier estimates, a figure staff said would give the investment team flexibility for unforeseen liabilities.

The board will continue monitoring market developments and asked staff to provide further commentary on potential FY26 earnings scenarios at a future meeting.