Oregon State Treasurer
FOR IMMEDIATE RELEASE
July 15, 2016
New diversified intermediate fund is available to qualified government entities for longer-term deposits
SALEM – Responding to requests from Oregon local governments, the State Treasury is now offering a new option to invest public funds.
The new Oregon Local Government Intermediate Fund provides qualified participants such as cities, counties, school districts and special districts with a Treasury-overseen investment pool for longer-term deposits such as reserves, in addition to the existing Oregon Short Term Fund.
The new intermediate term fund is constructed and diversified to potentially yield higher returns, depending on market conditions. However, unlike the Oregon Short Term Fund, invested principal will be at risk. Oregon local governments already can invest in private sector options with longer investment horizons, but requested that such a longer-duration vehicle also be made available through the State Treasury.
“We rely on our local governments in Oregon to improve public safety and wellbeing, to supply irrigation water, and to guide education and job training,” said State Treasurer Ted Wheeler. “At the Oregon Treasury, we worked diligently – in consultation with legislators — to design a new program that responds to the evolving financial needs of our vital local governments, while also ensuring appropriate oversight and diversification to reduce volatility.”
The Legislature in 2013 authorized the State Treasurer to allow local governments to participate in the State’s investment pools, when appropriate. In the 2015 session, lawmakers approved additional staffing and oversight capacity at the State Treasury. Treasury also added new technology and research capacity to aid in risk management across state-managed trust fund portfolios.
With the necessary capacity in place, the Oregon Investment Council approved investment guidelines for the new intermediate fund in March. The council oversees policy for public investments and trust funds. The fund was opened to investments on July 1. Only surplus funds can be invested in the intermediate term fund.
To be eligible to participate, local governments must meet requirements such as the inclusion of necessary language in local investment policies. Investment policies must be reviewed by the Oregon Short Term Fund Board. On Thursday, the board finalized an expedited review process of local government investment policies, because of the anticipated demand to invest in the new intermediate fund.
Don Hudson, finance director for the City of Tualatin, president of the Oregon Government Finance Officers Association and chair of the League of Oregon Cities Finance and Tax Committee, said many local governments have financial reserves – such as for infrastructure projects.
“This is a welcome development for Oregon local governments in those instances when we have longer-term investment needs,” he said.
The Oregon Local Government Intermediate Fund is diversified, all fund holdings are “investment grade,” and it cannot have more than 25 percent exposure to any market sector. The benchmark is the Barclays 1-5 Year Government/Credit Index.
The new fund is projected to serve potentially several hundred clients. Treasury will oversee the pooling of assets to achieve costs savings for participants, while the management of the investments will be delegated to an external provider.
While the existing Short-Term Fund is designed to hold deposits for a year or less, the new Intermediate Fund will be designed for a longer investment horizon. Based on historical performance, higher returns are more likely over a longer period, compared to shorter maturity alternatives. However, because of a different investment mix, the fund also will have higher volatility and principal loss risks.
Information about the fund is available at www.oregon.gov/treasury/Divisions/Investment/Pages/OLGIF.aspx
The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are overseen by the Oregon Investment Council. The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can track Treasury-related news on Twitter at @OregonTreasury.