Playing it safe with investments

By Dave Flaherty/The Oshawa Express

Many people have expansive investment portfolios, and municipal governments are no different.

Every year, the region’s finance department provides an update on Durham’s investments in terms of performance and adherence to policies and goals.

According to the 2017 annual report sent to council on Aug. 17, the region’s investment policy “sets a low-risk tolerance level and the overall investing approach emphasizes security of principal while maintaining liability.”

According to the staff report, a conservative approach to investing will protect the region from losses associated with periods of economic decline and ensures enough funds are available to meet financial obligations.

As central banks still maintain low-interest rates, the current landscape of relatively low returns is no different when it comes to Durham’s portfolio.

“The continued low-interest rate environment in 2017 resulted in investment returns that are lower than those obtained in the prior year,” the report states.

Several longer-term investments matured last year and were reinvested into shorter-term investments with a lower interest rate.

In all, Durham’s portfolio averaged 1.81 per cent in growth, down from 1.94 per cent in 2016.

Growth was a mixed bag across the spectrum.

In terms of treasury bills, the most liquid component on the market, the region’s average return of 1.81 per cent was much higher than the average one per cent yield in 2017.

Returns for investments with terms less than six months and from one to five years were both moderately down last year, while investments with a term between six months and one year saw a 0.25 per cent increase.

Investments with terms between 10 and 20 years saw no change in returns.

At the end of 2017, 65 per cent of the region’s portfolio value was invested in securities maturing in one year or less, meeting guidelines put in place to ensure there is enough access to cash to fulfil financial obligations.

These guidelines suggest at least of 50 per cent of investments should contain a term of one year or less.

In addition to the annual report, the region’s investments are examined by an external auditor.

Mary Simpson, acting commissioner of finance wrote, “all investment transactions for 2017 continue to conform to the region’s investment policies and goals as adopted by regional council, reflecting a low-risk tolerance and overall conservative investing approach to emphasize the security of principal, while maintaining ample liquidity.”