BOARD MEETING DATE: June 2, 2006
AGENDA NO. 20

REPORT:

Investment Oversight Committee

SYNOPSIS:

The Investment Oversight Committee met Friday, May 19, 2006 and discussed various issues detailed in the Committee report.  The next Investment Oversight Committee meeting is scheduled for Friday, November 17, 2006 at 12:00 noon in Conference Room CC8.

RECOMMENDED ACTION:

Receive and file this report.

David E. Ertel
Investment Oversight Committee

Attendance:  Present were Committee members David E. Ertel and Paul Sundeen.  Absent were Committee members Michael Antonovich and Gary Burton.

Investment Committee Action Items

Quarterly Report of Investments:  Reviewed the quarterly investment report to the Governing Board.  For the month of March 2006, the AQMD’s weighted average yield on total investments of $327,776,582, from all sources, was 4.26%.  The allocation by investment type was 82.19% in the Los Angeles County Pooled Surplus Investment Fund (PSI); 12.02% in the State of California Local Agency Investment Fund (LAIF); and 5.78% in Federal Agency securities and Negotiable Certificates of Deposit.  This report was accepted by the Committee Members present.  Owing to the lack of a quorum, a Committee recommendation was not made.

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 $191.8 million.

Financial Market Update:  James Martling briefed the Committee on the current interest rate market.  In summary, Mr. Martling stated that inflation fears appear to be back and that the financial markets are indicating doubts regarding the new Fed Chairman’s abilities.  The stock market has experienced a 5% drop in the last few days, the largest drop in three years.  The CPI report reflected a 0.6% increase for April, which was large and unexpected.  CPI data reignited fears that the Fed will prolong its series of interest rate hikes to tame inflation.  Many experts expect the Fed to hike rates by a quarter point to 5.25% at their next meeting scheduled for June 28.

Other Business:  None

Public Comment:   None