The Order of Priority:
1. Preservation of Principal
2. Adequate Liquidity
3. Consistent Returns
UACC believes that continuous investment in the bond market is vital toward achieving greater returns over time. In other words, public entities that have consistently maintained excessive cash equivalent investments will experience lower returns over time compared to public entities that maintain investments in the bond market and who have had their portfolios professionally managed.
Protecting principal, maintaining sufficient liquidity, and generating consistent returns is the foundation of UACC’s investment management program. We constantly evaluate the interest rate environment, including an assessment of economic factors, in order to formulate and implement an appropriate investment strategy. Identifying value along the yield curve and focusing on yield spreads between asset classes are important factors in the decision making process.
Active Portfolio Management
UACC employs active management strategies. We regularly analyze whether changes in the asset composition of a given portfolio will benefit earnings without added risk to the investment program, and whether changes in portfolio assets are consistent with the current investment strategy. Specific areas of analysis include the shape of the yield curve, differences in yield spreads between asset classes and asset types, and the interest rate environment.
Selecting Securities for the Portfolio
Identifying the appropriate securities for the portfolio is an important factor in the portfolio management process. UACC regularly identifies various eligible securities by accessing dealer inventories and comparing such secondary issues to new issues. Securities are selected for the portfolio based upon price and our analysis of yield spreads. Our ability to execute large transactions on a regular basis is a contributing factor to obtaining securities at competitive prices. Efficient executions minimize transaction costs.
Managing Bond Proceeds
UACC also specializes in the management of bond proceeds. The firm utilizes an active portfolio strategy with a goal of maximizing earnings while maintaining the flexibility to adapt to a changing draw schedule. As the bond proceeds are spent, UACC provides regular portfolio and asset-liability reports, customized for the issuer.
Our approach to managing bond proceeds focuses on matching assets with liabilities. The firm implements various strategies designed to maximize the yield (return) of the portfolio and to minimize any negative arbitrage. Although liquidity to meet scheduled draws is the primary objective, specific strategies are implemented to include the management of longer maturities in order to generate additional income. Portfolio maturities never extend beyond the final draw date.