Oregon Short-Term Fund Overview and Update. 2009 OMFOA/OACTFO Annual Spring Conference Salishan Spa & Golf Resort Spring Conference – Gleneden Beach, Oregon March 10, 2009 Perrin Lim - Sr. Fixed Income Investment Officer Tom Lofton – Investment Officer & Sr. Credit Analyst.
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2009 OMFOA/OACTFO Annual Spring Conference
Salishan Spa & Golf Resort Spring Conference – Gleneden Beach, Oregon
March 10, 2009
Perrin Lim - Sr. Fixed Income Investment Officer
Tom Lofton – Investment Officer & Sr. Credit Analyst
Part 1: Oregon Short-term Fund (OSTF) Oversight, Management, and Investment Guidelines.
Part 2: Changes in the OSTF Portfolio and Performance.
Part 3: Recent market events
Part 4: Thoughts on Credit Risk Evaluation.
Interest Rate Exposure
OSTF Portfolio Rules
Monitoring & Controls
External Manager Resources
Third Party Research
TARP I Passes
The TED spread (originally: Treasury vs. Eurodollar Futures but now is difference between T-bill rate and LIBOR) captures difference in risk premium between unsecured interbank borrowing (LIBOR) and risk-free gov't borrowing (T-bill) rates. Similar to LIBOR - OIS differential, it seeks to capture credit risk and cash hoarding, and can be highly driven by the flight to quality trade where the T-bill rate moving down dominates the change in the TED spread.
Difference between Investment grade and high yield spreads seeks capture price of credit risk in corporate term funding markets.
New class of investments : Government-backed corporate obligation.
Added dedicated credit analyst position.
Allows for better monitoring of credit risk.
Increases capacity to improve diversification within the portfolio.
Building “Reserve Fund”
Offsets short-term effects of potential future credit events.
Targeting about 1% of OSTF as a reserve fund balance.
Providing an excess of approximately 58 basis points versus historical default rates for the current credits in the OSTF.
Investment Policy dictates investment of assets
Mistakes happen…Goal is to learn and minimize in the future
Know what one buys…Form own opinion and evaluate relative to all outside resources.
Always consider Worst Case Scenario/Reaching for Yield – Sleep Factor
If 2-year US Treasuries bought and 2-year Treasuries increase 200 b.p.?
If credit bought and issuer experiences negative headlines