BOARD MEETING DATE: March 7, 2008
AGENDA NO. 26

REPORT:

Investment Oversight Committee

SYNOPSIS:

The Investment Oversight Committee met Friday, February 15, 2008 and discussed various issues detailed in the Committee report. The next Investment Oversight Committee meeting is scheduled for Friday, May 16, 2008 at 12:00 noon in the Executive Office Conference Room.

COMMITTEE:

Administrative, February 8, 2008, Recommended for Approval

RECOMMENDED ACTIONS:

Receive and file this report.
 

Bill Campbell, Vice-Chair
Investment Oversight Committee

Attendance: Present at AQMD were Committee members David E. Ertel and Paul Sundeen. Chairman Michael Antonovich and Vice Chair Bill Campbell attended by teleconference. Absent was Committee member Gary Burton.

Investment Committee Action Items:
Quarterly Report of Investments: Reviewed the quarterly investment report to the Governing Board. For the month of December 2007, the AQMD’s weighted average yield on total investments of $358,360,116, from all sources, was 5.10%. The allocation by investment type was 87.6% in the Los Angeles County Pooled Surplus Investment Fund (PSI); 11.0% in the State of California Local Agency Investment Fund (LAIF); and 1.4% in Negotiable Certificates of Deposit. The Committee approved the quarterly report.

Approval of Annual Investment Policy and Delegation of Authority to Appointed Treasurer to Invest AQMD Funds: The Committee reviewed the Annual Investment Policy, which included recommended changes further strengthening the credit requirements for any mortgage pass-through bond, equipment lease-backed certificate, or consumer receivable backed bond, and discussed the renewal of its delegation of authority to its treasurer. The AQMD Annual Investment Policy and the reauthorization of the Los Angeles County Treasurer to invest and reinvest AQMD funds were recommended for approval at the March 7, 2008 meeting of the Governing Board.

Investment Committee Discussion Items:
Financial Market Update: Jim Martling (Sperry Capital) provided the Committee with comments on the current investment market conditions. In summary, Mr. Martling’s comments stated that the capital markets continue to experience tremendous liquidity and credit problems as a result of the sub prime mortgage meltdown. Municipal bond insurers have been some of the hardest hit by the sub prime market crisis as questions regarding their capital adequacy have surfaced. With investors worried that potential downgrades will lead to massive write-downs in their holdings of securities guaranteed by the bond insurers, state and federal regulators have been trying to rally banks and investment banks to rescue the bond insurers. The AQMD’s 1995 and 2004 pension obligation bonds (POBs) were AAA insured by municipal bond insurer MBIA. If MBIA is downgraded, the value of these bonds may decline relative to AAA insured bonds in the secondary market. A lower value in the secondary market would not have a financial impact on the AQMD. The AQMD and MBIA also entered into a $19.1 million Investment Agreement in December 2006 to reduce AQMD’s pension bond costs. AQMD’s investment advisor, Sperry Capital, is monitoring MBIA’s AAA credit rating and will advise the Board of the implications of any downgrading.

Other Business: None

Public Comment: None