Crossing Main Street to Bay Street / Risks and Rewards
Municipal Investor Update - February 19, 2020
How do you bridge together municipal government and the often high-stakes, profit-driven world of high finance? Learn about ONE Investment’s team of experts, who guide municipalities as they look to earn more for their communities through careful investments.
How do you balance the risk of investing against the risk of doing nothing? Understand three key tips for investing wisely.
Read these two articles in full. See below.
Bridging the Gap from Main Street to Bay Street
There is a world of difference between municipal government (financially cautious, public service-oriented) and the often high-stakes, profit-driven world of high finance.
But whether municipalities are moving to prudent investor or sticking with the legal list, in today’s fiscal environment, governments need expertise in both spheres more than ever.
The reality is that no one can afford to forego investment earnings that would help fund essential capital projects. Property taxes and provincial grants are just not enough.
“Every dollar you earn on investments is one less dollar you have to bill the property taxpayer or beg from the province,” says Judy Dezell, Director of AMO’s Enterprise Centre. “However, most municipal governments don’t have the in-house expertise to navigate financial markets. That is why ONE Investment is bridging the gap.”
ONE Investment, which has provided turnkey investment solutions for municipalities for more than two decades, has created a municipal investment advisory team to help provide the full range of expertise that municipalities need.
The team has dedicated investment expertise, including a CFA charterholder and a municipal finance expert. The team will guide municipalities through each step from understanding their cash flow and asset management plan, to building municipal investments into a capital financing strategy. It will also provide guidance on the appropriate investment policy and portfolio structure.
Investment Manager Keith Taylor is a CFA Charterholder who worked for 20 years in investment management. Keith will also help monitor and review investments annually. As the timeframe narrows on different projects, investments will need to be adjusted accordingly. Modifications might also be needed based on changing local circumstances and priorities.
The bottom line is that no municipality has to dive in to investing alone.
Learn more by reaching out to the team.
Users Guide: How to Think About Risk
Whether your municipality is considering the prudent investor standard or sticking to the legal list, when it comes to investing public funds (or any funds, for that matter) there is always an element of risk.
But what is the risk of doing nothing? With inflation at 2% per year, financial assets can erode over time without proactive financial management. The risk of investing has to be weighed against the very real risks of leaving money idle.
How you think about risk is critical to how you approach and manage investments. There are three key tips to investing wisely:
- Know your cash flow: It’s the foundation of all investment decisions. You must know what you need over what time frames. Besides having different buckets -- such as for the next one to three years, five years plus, and 10 years plus -- it’s also about knowing your revenue flexibility. What are projected trends in tax revenue or other sources based on demographics and other factors? In terms of expenses, what is predictable and what is beyond your control? Learn more about linking cash flow and asset management planning.
- Be open to new advice, but carefully consider who is giving it. The only way to learn about markets and investing is to talk to people about different options, strategies and opportunities. It is critically important to understand where the advice is coming from and how that person is paid. What financial incentives do they have for promoting a certain product or strategy to you? You can learn more about financial service providers in previous articles about their compensation and accountability. Keep in mind that ONE Investment is a non-profit that has focused solely on serving the municipal and broader public sector for 25 years.
- Consider risk of the total portfolio, not individual products. Various investment products respond to markets differently. A balanced approach, like having a core of more conservative products with a smaller “satellite” investment in something like a global equity fund, means that you can benefit when markets are up and buffer losses when they are down.
While investing can seem complicated, risk can be managed. ONE Investment’s municipal investment advisory team works with municipalities to provide advice on portfolio structure and investment policies that help ensure investments meet both the future needs and risk profile of your community.