Great Lakes tells Hinsdale Twp HSD 86 committee reserves outperformed benchmark in Q1; advisers recommend ‘stay the course’

Great Lakes Advisors told the Hinsdale Township High School District 86 Finance & Facilities Committee on April 13 that the district’s investment fund returned 64 basis points in the first quarter, outperforming the benchmark by 37 basis points gross and 34 net.

The Great Lakes representative said the fund’s outperformance is driven by higher yield from agency mortgage‑backed securities, which make up roughly 65% of the portfolio. “For the first quarter … the fund returned 64 basis points, which is 37 basis points better than the index,” the representative said. The presenter explained that agency‑backed securities carry little credit risk because they are backed by the U.S. government but noted refinancing risk if borrowers prepay mortgages en masse.

Why it matters: the district’s invested reserves are a key backstop for future capital and operating needs. Committee members questioned whether the returns were reported net of fees; the adviser confirmed the 34‑basis‑point figure was net of fees and spelled out liquidity: roughly $1.5 million in holdings roll off each month, providing access if the district needed to draw on reserves.

The presenter described portfolio duration and interest‑rate sensitivity: “The duration of the portfolio is a little longer than the index…we’re at about 2.3 years; the index is 1.8 years,” and said the position is intended to perform across likely interest‑rate scenarios. Committee members pressed whether other districts pursue more aggressive investments; advisers said state chartering and statutory limits constrain allowable placements and that, given the district’s reserve growth and lack of near‑term cash needs, the recommended strategy is to “stay the course.”

Committee members also heard that the portfolio’s yield profile produces roughly a mid‑single‑digit return in the current environment (representative discussed yields near 4.6–5.0% for agency holdings versus lower yields on treasuries and corporates) and that the firm periodically reviews the allocation with the district. The committee did not take a formal vote on changing strategy and will continue to receive periodic reports.

Next steps: Great Lakes will continue quarterly reporting to the committee and an annual in‑person review; staff did not propose any immediate change to the district’s investment policy during the meeting.