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Simplifying Investment Fund Administration

Simplifying Investment Fund Administration. Presented by Dave Lebryk Deputy Assistant Secretary for Fiscal Operations and Policy. Overview of Investment Funds. August 31, 2002: 172 active investment funds hold approximately $2.683 trillion Composition of Investment Funds:

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Simplifying Investment Fund Administration

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  1. Simplifying Investment Fund Administration Presented by Dave Lebryk Deputy Assistant Secretary for Fiscal Operations and Policy

  2. Overview of Investment Funds • August 31, 2002: 172 active investment funds hold approximately $2.683 trillion • Composition of Investment Funds: • $2.261 trillion of par value specials (84.3%) • $0.422 trillion of market-based specials (15.7%)

  3. Federal Investment Program Securities Transactions FY 2000 • 130,000 securities transactions • Dollar volume more than $31 trillion

  4. Survey of Investment Funds • The Office of Investment Fund Administration (OIFA) conducted and completed a series of interviews with the respective Treasury program managers of 21 investment funds, valued at $41 billion. • The objectives were to gain a more comprehensive understanding of policies and practices and to ultimately assess whether these Treasury offices are carrying out their responsibilities adequately.

  5. Survey Conclusions • The funds were well-managed. • However, the personnel resources at the fund level are thin. • Maintaining proper expertise and institutional memory is becoming increasingly difficult.

  6. Growth of Investment Funds and Growing Complexity • Investment process has evolved into a complex operation. • Involving: • Multi-offices and bureaus of Treasury (9 total) • Program agencies (72 total)

  7. Simplification • Are there ways to simplify the method of investing these government funds? • Several factors need to be considered when assessing any simplification initiative.

  8. Considerations • Legislation and statutory compliance • Resources and expertise • Accounting and reporting • Costs and operational issues

  9. Philosophy Behind Current Investment Practice • The amount of excess moneys, i.e. moneys not needed to meet current needs of the fund, are invested in Treasury special securities. • The program agencies select maturities for these securities that are suitable to the needs of the fund. • The program agencies then request the Secretary of the Treasury to make the investments.

  10. Use of Non-Marketable Market-based Treasury Securities • These securities, like marketable securities, provide investment funds with maximum safety, a wide range of maturities, and prompt liquidation prior to maturity (if needed). • These securities also prevent investment funds from disrupting the public market for Government debt, reduce transaction costs for both the program agency and Treasury, increase liquidity for the investment fund and allow for better Government (including Treasury) oversight.

  11. History of Investment Policy Reviews • Since November 1974, when the Office of the Fiscal Assistant Secretary developed and introduced the market-based special non-marketable Treasury security, a number of reviews have been undertaken: • January 1975: GAO report to determine whether a more uniform system for paying interest to each fund would be feasible. • September 1998: BPD looked at ways to improve operations including simplifying accounting procedures and practices.

  12. History of Investment Policy Reviews (cont’d) • November 1999: Treasury conducted a comprehensive review of Treasury’s duties and responsibilities relating to its administration of investment funds, concluding with a report “Treasury Responsibilities in Investment Fund Administration” completed in November 2000.

  13. History of Investment Policy Reviews (cont’d) • More recently, we have began to consider several additional options to simplify and standardize the method of investing Federally-administered funds. For example, we could consider a short-term and longer-term money market-like funds, par value securities using various coupon rates, and the option of replacing Treasury bills and overnight securities with a short-term money market-like fund and retaining existing market-based Treasury notes and bonds for longer-term investments. • These are very preliminary thoughts. Surely, there are other proposals worth considering.

  14. Simplification Ideas • We are interested in hearing from the various program agencies. • Please contact: Dan Decena - Telephone Number: (202) 622-0637 - Fax: (202) 622-0627 - E-Mail: dan.decena@do.treas.gov

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