Cash Management Proposal

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18 Νοε 2013 (πριν από 3 χρόνια και 29 μέρες)

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Cash Management Proposal



Issue:

UVU currently invests all “working capital
cash” in Utah State Treasurer’s Pool. Cash is liquid
and safe but only earns at the lowest “short
term” rates.


Proposal:

That UVU take some of its not used
and available “working capital cash” and invest it
in “Intermediate
-
Term Investments,” enhancing
earnings on cash (approximately four times the
rate), while following all Utah Money Management
Act requirements, in prudent investments in CDs,
Treasuries, Agency Bonds and high
-
rated
Corporate Bonds.

Cash Management Proposal


Enhance earning on
cash


Diversify portfolio


Ladder investments for liquidity


Continued compliance with the Money
Management Act


H
ISTORY

OF

UVU'
S

C
ASH

B
ALANCE

0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
Jun-02
Oct-02
Feb-03
Jun-03
Oct-03
Feb-04
Jun-04
Oct-04
Feb-05
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
PTIF LOW BALANCES BY MONTH

AMOUNT
Cash Balances

Cash

Funds

30
-
Jun
-
11

30
-
Jun
-
07

Plant and Equipment Projects

$22,790,000

$615,000

Self
-
Insurance, Payroll Liabilities


20,142,000

401,000

Education

and General


17,652,000

25,580,000

Gear
-
Up Grant and Other
Scholarships


7,811,000

3,433,000

Plant Maintenance & Repairs,
Debt Retirement


7,154,000

3,652,000

Continuing Education


4,968,000

245,000

Auxiliary Enterprises


4,771,000

2,089,000

Student Activities


3,783,000

1,365,000

Service Enterprises


2,775,000

1,233,000

Grants, Agency, other


2,188,000

3,850,000

Aviation


1,862,000

4,198,000

Institutional Interest Income


1,136,000

3,000

Total

$97,032,000

$46,664,000

Cash
Management Strategy


Safety
of
principal


UVU currently deposits all its “cash” with the Utah
State Treasurer’s Pool. (Safe, but all cash with single
entity)


Need for
liquidity


This “pool” is very liquid


Yield on
investment


PTIF has a low yield


UVU follows the
State Money Management Act
criteria for investing

Proposal to Increase Yield


All investments strictly follow the Utah
Money Management Act


Purchase intermediate
-
term high grade
investments


Investments will be laddered for liquidity


All investments are held in the name of
the University

Money Management Act


Investing may only be done through approved
Certified Dealers and Advisors


Dealers






Advisors


Barclays
Capital Inc
.



Cutwater Asset Management


Cortview

Capital Securities LLC


Morgan Stanley Smith Barney


George K. Baum & Co.



Yellowstone Partners LLC


Jeffries & Co




Zions

Wealth Advisors DBA for


JP Morgan Securities, LLC



Contango

Capital Advisors
Inc


LPL
Financial LLC


Merrill Lynch, Pierce,
Fenner

& Smith


Morgan Stanley Smith
Barney


Raymond James & Associates, Inc.


RCB Capital Markets Corp
.


Sterne, Agee & Leach, Inc
.


UBS Financial Services Inc
.


Wells Fargo Advisors LLC


Wells Fargo Securities, LLC



Certified Dealers:
Recognized by the
Federal Reserve Bank of New York


Certified Advisors:
Registered under
Section 203 of the Investment
Advisers Act of 1940

Money Management Act


Requires liquidity


Laddering investments allows for liquidity



Outlines approved investment instruments that are
rated "A" or higher or the equivalent of "A" or higher,
by two nationally recognized statistical rating
organizations one of which must be Moody's
Investors Service, or Standard and Poor's;


CDs


R
epurchase Agreements


C
ommercial Paper (Commercial Bonds)


US
Treasury O
bligations


Other obligations
of Federal and State
Governments
.


Short
-
Term Investments (Cash)

Risks

How to mitigate the risks

Market

risk
-

Rise

in interest Rate

Hold to maturity


Headline

risk
-

Bad press in a segment

Diversification <5%

in each segment

Liquidity risk
-

Sell

before maturity

Ladder the investments

Administrative


Use Certified

Dealers only

General

market risk

Follow recommendations
given by
Certified Dealer and Advisor’s
research teams

Reward
vs

Liquidity Risk

Time



Yield

Short
-
term

Investments


Bank
Deposits


Money
Markets


Overnight
Funds

Possible additional yield

By actively layering liquidity over time

Intermediate
-
term

Investments


CDs


Treasuries


Agency Bonds


Corporate
Bonds

What are other Universities doing
for Cash Management?

U of U

USU

WSU

SLCC

UVU

SNOW

DIXIE

SUU

% in PTIF

10
-
13%

<10%

50%

25%

100%

34%

100%

66%

% of time
spent
managing

investments

10
-
15%

30%

10%

10%

0%

15%

0%

5%

How far

out


Maturity
dates

<5

Years

<5

Years

<5

Years

<2

Years

Liquid

<5

Years

Liquid

<3 Years

Safekeeping

Wells
Fargo

Wells
Fargo

Wells
Fargo

Zions

&
Wells
Fargo

PTIF

Zions

&
Wells
Fargo

PTIF

Wells
Fargo

Certified
Dealers

and
Advisors
(Brokers)

Wells
Fargo

Zions
,
Wells
Fargo,

George
K Baum,
Smith

Wells

Fargo

Zions
,
Wells
Fargo,

George K
Baum

N/A

Zions
,
Wells
Fargo

N/A

Wells
Fargo,
George
K Baum

What are other Universities
doing
for Cash Management?

U of U

USU

WSU

SLCC

UVU

SNOW

DIXIE

SUU

Dedicated

Cash
Investment

Manager

NO

NO

NO

NO

NO

NO

NO

NO

Background
?

Finance

Acc

Econ

Acc

Acc

Acc

Acc

Acc

Short
-
term

investment

amount
?

$1 B

$285 M

$100 M

$85 M

$100 M

$20 M

$20
M

$60
M

Types
of

investments
?

US
Treasuries,
Federal
agencies,
repurchase
agreements

Bank CDs,
corporate
bonds,
corporate
floaters

Bank
CDs,
Federal
agencies

Bank CDs,
corporate
bonds,
corporate
floaters

PTIF only

State &
Local
government
bonds,
Federal
agencies,
corporate
bonds

PTIF only

Bank CDs,
Corporate
floaters,
Federal
Agencies


What are other Universities doing
for Endowments?

U of U

USU

WSU

SLCC

UVU

SNOW

DIXIE

SUU

Dedicated

Endowment
Manager?

Yes

No

Yes

No

No

Small
Endowment

No

Yes

% of Job

100%

50%

Endowment,
CM,
Foundation

<20% of
Time

15%

Part of
Director of
Acct Duties

5%

(all with U,
½ basis
point
charge)

95%

(Entry level
Accounting)

Options Available

Options

Costs

Continue with current PTIF Strategy

Opportunity Costs
-

$500,000
-
600,000

Hire an Investment

Manager

$75,000 + 31,365 + 30,000 =

$136,000


Salary + Benefits + Bonding

*Use Wells Fargo as part of our

current banking contract

Fees

+ Commission deducted before yield
is computed

Request for proposal

(RFP)

Opportunity Costs
-

4
-
6 months

*Administration recommends using Wells Fargo

and one other
Certified Dealer, following the State Money Management Act

“We
haven’t looked at entertaining the use of
an (in
-
house)
advisor because it is difficult under the limitations of the Act to
get a return large enough to cover the cost of the hiring of an
(in
-
house) advisor
.”
-

Mel
F.
Smith,
Manager


Banking &
Operational
Investment, University of Utah