BOARD MEETING DATE: June 4, 2004
AGENDA NO. 29

Investment Oversight Committee

SYNOPSIS:

The Investment Oversight Committee met Friday, May 21, 2004 and discussed various issues detailed in the Committee report. The quarterly meeting scheduled for August 20, 2004 has been cancelled. The next Investment Oversight Committee meeting is scheduled for Friday, November 19, 2004 at 12:00 noon in Conference Room CC8.

RECOMMENDED ACTION:

Receive and file this report.

Michael Antonovich, Chair
Investment Oversight Committee

Attendance: Present were Committee members Michael Antonovich (via videoteleconference), Gary Burton and William S. Craycraft. Absent were Committee members David E. Ertel and Paul Sundeen.

Investment Committee Action Items:

Quarterly Report of Investments: Reviewed the quarterly investment report to the Governing Board. For the month of March 2004, the AQMD’s weighted average yield on total investments of $238,290,612, from all sources, was 1.38%. The allocation by investment type was 83.4% in the Los Angeles County Pooled Surplus Investment Fund (PSI) and 16.6% in the State of California Local Agency Investment Fund (LAIF). The Committee approved the quarterly report.

Due to a light committee agenda, the regularly scheduled meeting for August 20, 2004 has been cancelled. The quarterly report on investments will be forwarded to the Board and Committee members in July. A meeting will be scheduled if any member of the Board or Committee wishes to discuss the investment report or has any other business for Committee consideration.

Investment Committee Discussion Items:

Cash Flow Forecast: Rick Pearce reported on the cash flows for the current year and projected for the next three years. AQMD Investment Policy limits its Special Purpose investments to 75% of the minimum amount of funds available for investment during the Cash Flow Horizon. That limit, which includes all funds (General, MSRC, Clean Fuels), is approximately $101.6 million.

Financial Market Update: Terry McGuire (Sperry Capital) briefed the Committee on the current interest rate market. In summary, Mr. McGuire stated that most economists expect the Federal Reserve to start a "moderate" response to the strengthening economic environment by raising the Fed Funds rate this summer, with debate over timing between June and August. The yield curve is very steep from six months to five years and this is expected to continue with the broad expectations for rising interest rates going forward. Concerns for the economy and interest rates going forward include: high oil prices hampering the economic recovery; rising budget deficits, rising trade deficits and rising mortgage rates slowing down economic recovery; a housing bubble; and if inflation is on the rise can it be controlled?

Other Business: None

Public Comment: None

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