The public investor's practical guide to the fundamentals of investing in an easy-to-read format. As times change and public cash management and investing becomes more sophisticated, it is education in the fundamentals to which the new as well as the seasoned investor always returns.
This 100+ page book includes examples, tips, samples and checklists covering: the eight steps in the investment process; building an investment policy; managing risk; simplifying cash flow analysis and much more.
Fundamentals of Public Investing is written for the government treasurer, finance officer and staff involved in the investment and/or oversight of public funds and treasury operations. This brand new book covers the nuts and bolts of building an investment program and how to best navigate the day-to-day hurdles and political realities faced by public investors.
"I went directly to the chapter on cash flow as that was of particular interest and it was spot on. The author offers a relatively simple approach to getting started with cash flow and then moves the reader to a more sophisticated way to display and forecast cash flow. I am looking forward to diving into the rest of the book!"
Rob Hendrickson, Finance Director, City of Covington, WA
"Fundamentals of Public Investing employs a straight forward plain English approach to explaining banking and investment terms and requirements."
Bob Scott, Chief Financial Officer, City of Carrollton, TX
Table of Contents
Chapter 1: What is Public Investing
What is Public Investing?
What is Cash Management?
What is the Investment Process?
Risk, Responsibility and Reporting
Steps in the Investment Process
Cash Flow Analysis
Setting our Strategies
Developing an Investment Policy
Developing Procedures and Internal Controls
Structuring a Portfolio
Monitoring the Program’s Changing Needs
Reporting and Performance Measurement
What is a Public Investor?
Positive Characteristics for Public Investing
Impediments to Public Investing
Wearing Too Many Hats
Steps that Help You:
Recognizing your Risk Tolerances
Identifying your Cash Flow Needs
Choose Authorized and Reasonable Investment Types
Establish a Policy as a Framework and Guide
Develop a Macro Strategy as to Passive/Active
Establish Internal Controls
Understand Market Forces
Structure the Portfolio to Match Risk and Cash Flow Parameters
Report Regularly to Monitor Compliance with Your Objectives and Parameters
Fear of Not Having Funds Available and Fear of Job Security
Responsibility Without Authority
Who is Involved in Public Investing
The Governing Body’s Role
The Investor’s Role
Broker/Dealer’s (Banks and Pools) Role
Investment Advisor’s (Money Managers) Role
The Cost of Lost Opportunity
Chapter 2: Building the Investment Pyramid
Prudence and Change
Caution and Risk Aversion
The Oink Factor
Are you SLY Enough?
How Do I Achieve Safety?
Documentation - DVP
Reporting and Reviewing
How Do I Achieve Liquidity?
How Do I Achieve Diversification?
How Do I Achieve Yield?
Four Factors Influencing Yield
Cash Flow Analysis
Finding & Identifying Best Alternatives
Chapter 3: Managing Risks
Managing Market Risks
How Do I Manage Credit Risk?
How Do I Manage Liquidity Risk?
Liquidity Risk and its Causes
Size of Issue
How Do I Manage Market and Volatility Risk?
How Do I Manage Event Risk?
How Do I Manage Extension Risk?
How Do I Manage Re-Investment Risk?
How Do I Manage Collateral Risk?
Defining the Collateral
Establishing the Amount of Collateral
Assuring Collateral is Legally Pledged by Bank or Owned Under Repo Agreement
Market Risk Summary
Managing Non-Market Risks
How Do I Manage Counterparty Risk?
How Do I Manage Safekeeping Risk?
How Do I Manage Banking Risks?
How Do I Manage Employee Risk?
How Do I Manage Portfolio Risk?
Don’t Forget the Technology Challenges
Chapter 4: Simplifying Cash Flow Analysis
Cash Flow Complexity
Cash Flow Reduces Risk
But What Good is Cash Flow?
What is Cash Flow?
The 80-20 Rule
The Let’s Go Cash Flow Analysis (The LG Process)
Let’s Go Step 1
Identifying a Core
Controls and Policy Implications Built from Cash Flow
The Weighted Average Maturity Control
A More Detailed Approach to Cash Flow
Cash Flow Worksheet
Expanding the Information
Cash Flow Analysis Maintenance
Using the Information
Chapter 5: Developing an Investment Policy
Bringing Together the Investment Process in a Policy
Who is Involved in Developing the Policy?
The Steps in Writing a Policy
Internal Policy Review Questions
Necessary Elements of an Investment Policy
The Policy Statement
Legal and Statutory References
Delegation of Authorities and Responsibilities
Ethics and Disclosure Requirements
Standard of Care
Authorized Financial Institutions and Broker/Dealers