New Short Term Pool Investment Strategy Frequently Asked Questions

Q. What is the change?

A. We are pleased to announce a new investment strategy that provides us with potentially higher returns while still maintaining the flexibility required for grantmaking. We are now investing in an enhanced cash strategy with the goal to provide capital preservation, grantmaking liquidity, and income consistent with short term Treasury bills. The enhanced cash fund is managed by Payden & Rygel.

Q. What was the previous short term pool investment strategy?

A.  In the past we have invested in money market funds. While this guaranteed liquidity, the pool earned very little in interest.

Q. Why the change?

A. We are trading a small amount of short term price risk for the expectation of modestly better long term returns.

Q. What is the strategy for this fund?

A. The investment return objective for this fund is to outperform the Merrill Lynch three-month Treasury Bill Index, net of management fees, when measured over three to five year periods.

Q. What are the Fund investments?

A. The fund will hold high quality U.S. Government Securities, Commercial Paper, Short Term U.S. Investment Grade Corporate Bonds, and very liquid structured paper, while maintaining an overall portfolio rating of AAA.

Q. What are the specific investment guidelines?

A. All securities have a maximum maturity of two years with an emphasis on floating rate notes with a three month effective maturity. The fund will target an average duration of six months with a maximum of one-year; the average credit quality will not fall below AAA, with an allowance of up to 10% in BBB-rated securities.

Q. What is short term price risk?

A. This strategy is not a money market fund and can be subject to some short term volatility. Over the past ten years this strategy turned in positive results in 97% of the quarters and outperformed a 3-month Treasury bill by 0.63% annually. When the strategy had a negative quarter (3% of the time), it took less than two months to recoup the losses.

Q. How has this strategy and this investment manager performed historically?

A. The current yield on the portfolio is 0.45% vs. money market yields of 0.15%. Over the past three years, this strategy has returned 2.62% annually, net of fees compared to our prior strategy, which returned 1.9% over the past three years. Payden & Rygel has been managing short term cash since its inception 27 years ago and has demonstrated expertise and a consistent track record in this strategy.