BOARD MEETING DATE: December 2, 2005
AGENDA NO. 21

Investment Oversight Committee

SYNPOSIS:

The Investment Oversight Committee met Friday, November 18, 2005 and discussed various issues detailed in the Committee report. The next Investment Oversight Committee meeting is scheduled for Friday, February 17, 2006 at 12:00 noon in Conference Room CC8.

RECOMMENDED ACTIONS:

Receive and file this report.

Michael Antonovich, Chair
Investment Oversight Committee

Attendance:

Present were Committee members Michael Antonovich (via teleconference), Gary Burton, 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 September 2005, the AQMD’s weighted average yield on total investments of $294,845,423, from all sources, was 3.29%.  The allocation by investment type was 83.6% in the Los Angeles County Pooled Surplus Investment Fund (PSI); 13.4% in the State of California Local Agency Investment Fund (LAIF); and 3.0% in Federal Agency securities.  This report was reviewed and accepted by the Committee members present.  The Committee voted to recommend approval.

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 $187.0 million. 

Financial Market Update:  Terry McGuire briefed the Committee on the current interest rate market.  In summary, Mr. McGuire stated that the economy continues on a path of moderate to strong growth with jobless claims lower than expected at 303K last week.  Productivity remains strong, increasing 4.1% for the third quarter, and Personal Income increased 1.7%.  New Housing Starts declined last month raising concerns over a slowdown in the housing sector.  As expected, the Federal Reserve has continued to increase the Federal Funds Rate at a measured pace for the past twelve meetings by 25 basis points to the current level of 4.0%.  Another 25 basis points increase is expected at the next meeting in December.  The yield curve can not really flatten much further without going negative; the entire curve may start to shift upward if current fiscal and monetary policies continue.  Iraq, terrorism threats, the effects of the hurricane season and high oil prices remain the major uncertainties facing the economy.

Calendar Year 2006 Committee Meeting Dates:  For CY 2006, quarterly Investment Oversight Committee meeting dates are Friday, February 17, Friday, May 19, and Friday, November 17.  The August quarterly meeting has been cancelled in conjunction with the cancellation of all AQMD Board and Committee meetings during the month of August 2006.

Other Business:  None

Public Comment:   None

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