Power in numbers

Late last year, the Yorba Linda Water District — a public agency serving residents of Yorba Linda, Calif., and portions of Placentia, Brea, Anaheim and some unincorporated areas of Orange County — joined a statewide investment pool for local agencies in an effort to generate greater returns on its investments. In six months, the district has seen significantly higher returns on its cash and an improved ability to monitor its portfolio as a result of its participation in the CalTRUST Joint Powers Authority.

The California State Association of Counties Finance Corp. and the League of California Cities launched CalTRUST in 2005 to provide a way for counties to pool their assets for investment. Local agencies invest directly in three pools — money market, short-term or medium-term accounts — depending on their time horizons and cash flow needs. The group now includes more than 85 California agencies and more than $1 billion in short-term cash.

Before joining CalTRUST, the Yorba Linda Water District was making individual investments, working with San Francisco-based Wells Capital Management. However, district Finance Director Stephen Parker recognized that the district's reserves were often spent down below $20 million to meet obligations, and that was no longer in the "sweet spot" for generating returns in an individual managed account.

In reviewing the district's investment options, Parker learned about CalTRUST, which also is managed by Wells Capital and uses accounting infrastructure provided by Rocky Mount, N.C.-based Nottingham Investment Administration. In the pool, participants can set up separate sub-accounts for different reserve funds as a part of a single, consolidated portfolio; choose from multiple investment options and move money between them; and transfer cash back to their home banks. The pool also allows agencies to have investments with a longer average maturity — for example, a term of one year — but also withdraw funds monthly.

Parker moved the district's investments into the pool in May and saw immediate results. "Our yield literally doubled instantly when we moved from personal investment management to the CalTRUST program, rising from 0.42 to 0.84 percent," Parker says. "While the numbers may not look that big on an absolute basis, the increase was still a very positive development for us."

The pool's accounting infrastructure also offers greater portfolio transparency than the district had on its own, compliance monitoring through online reporting, the ability to compute daily net asset value on an account-by-account and a consolidated basis, and lower administration costs. Parker anticipates taking advantage of the pool's online trading services soon.

Project: Investment pool
Agency: Yorba Linda (Calif.) Water District
Vendor: CalTRUST Joint Powers Authority; San Francisco-based Wells Capital Management; Rocky Mount, N.C.-based Nottingham Investment Administration
Date: May 2010