SHIRLEY -- Treasurer Kevin Johnston updated the selectmen at their Nov. 19 meeting on the state of the town's trust fund investment strategy. Actually guidelines more than rules, he recommended upgrading those practices to policies.
The document he brought to the board for that purpose included recipes for success he's been following for years, Johnston explained. Now, there's an opportunity for the board to review and "bless" the strategies laid out in the document and to raise the investment ceiling besides, from 20 percent to 25 percent on equity investments.
The proposed hike is based on the premise that paybacks on fixed investments are "low" and expected to stay that way, Johnston explained.
State law requires the treasurer to invest public funds at the highest possible return, given that the investments are safe and the assets liquid, "first and foremost," he said. "We try to see that every dollar possible" is invested in FDIC-insured institutions.
"Frankly, we keep as little cash as possible" on hand, he continued, with about $1 million to $2 million in banks at any given time.
But the town's nest egg doesn't just sit there, unattended. Both he and the town's investment advisors keep close tabs on it and money is moved if necessary, Johnston said. "If any red flags come up with rating agencies," he acts accordingly.
He talked about "collateralization," and high-rated investments and said it's all about targeting those that are "guaranteed" not to fail.
But part of the make-money strategy involves risk, Johnston explained. Managed, of course, with a "tolerance" for it factored into the town's long-term investment plans.
With increased risk comes potential for gains. "It may take about 8 to 10 months to get there," given the size of our portfolio," he said.
But the "risk tolerance part" was new to the document, Johnston said. "We and the advisors will sign it," and they will review it "based on our needs" and guidelines already in use.
There may be edits to the document, which Johnston promised to bring back for the board to look over again when it's finalized. "What you should understand is that there is a process behind our investment strategy," he said. And rules that are followed to the letter.
It might sound scary to the uninitiated, but Johnston said the town's investment plan is "very limiting" and more conservative than an individual investor might have.
At this point, the picture looks good and things are looking up. "My hope is that we'll be in a similar position in the spring and can raise the ceiling a bit more," he said.
Selectman David Swain noted that the list of state-sanctioned investments included institutions that have gone under, such as AIG and Bank of America, but he was aware that the list was old, dating to 2007.
Johnston said the state hasn't updated the list recently. He acknowledged that AIG should be crossed off, but not Bank of America. "We plan to maintain (it) and perhaps buy more," he said. "We could deviate from the list, but I don't recommend it."
Swain asked for a current list of the town's actual investments and a statement of its cash position, both of which Johnston agreed to provide, with copies to the Finance Committee.
"Overall, we're in a good place that I'm comfortable with," Johnston concluded.
The board passed a motion to increase the equity investment ceiling to 25 percent but held off on signing the document until it is finalized.