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Cash Management Proposal Issue: UVU currently invests all “working capital cash” in Utah State Treasurer’s Pool. Cash is liquid and safe but only earns.

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Presentation on theme: "Cash Management Proposal Issue: UVU currently invests all “working capital cash” in Utah State Treasurer’s Pool. Cash is liquid and safe but only earns."— Presentation transcript:

1 Cash Management Proposal Issue: UVU currently invests all “working capital cash” in Utah State Treasurer’s Pool. Cash is liquid and safe but only earns at the lowest “short term” rates. Proposal: That UVU take some of its not used and available “working capital cash” and invest it in “Intermediate-Term Investments,” enhancing earnings on cash (approximately four times the rate), while following all Utah Money Management Act requirements, in prudent investments in CDs, Treasuries, Agency Bonds and high-rated Corporate Bonds.

2 Cash Management Proposal Enhance earning on cash Diversify portfolio Ladder investments for liquidity Continued compliance with the Money Management Act

3 H ISTORY OF UVU' S C ASH B ALANCE

4 Cash Balances Cash Funds30-Jun-1130-Jun-07 Plant and Equipment Projects$22,790,000 $615,000 Self-Insurance, Payroll Liabilities 20,142, ,000 Education and General 17,652,000 25,580,000 Gear-Up Grant and Other Scholarships 7,811,000 3,433,000 Plant Maintenance & Repairs, Debt Retirement 7,154,000 3,652,000 Continuing Education 4,968, ,000 Auxiliary Enterprises 4,771,000 2,089,000 Student Activities 3,783,000 1,365,000 Service Enterprises 2,775,000 1,233,000 Grants, Agency, other 2,188,000 3,850,000 Aviation 1,862,000 4,198,000 Institutional Interest Income 1,136,000 3,000 Total$97,032,000 $46,664,000

5 Cash Management Strategy Safety of principal  UVU currently deposits all its “cash” with the Utah State Treasurer’s Pool. (Safe, but all cash with single entity) Need for liquidity  This “pool” is very liquid Yield on investment  PTIF has a low yield UVU follows the State Money Management Act criteria for investing

6 Proposal to Increase Yield All investments strictly follow the Utah Money Management Act Purchase intermediate-term high grade investments Investments will be laddered for liquidity All investments are held in the name of the University

7 Money Management Act Investing may only be done through approved Certified Dealers and Advisors Dealers Advisors ◦ Barclays Capital Inc.Cutwater Asset Management ◦ Cortview Capital Securities LLCMorgan Stanley Smith Barney ◦ George K. Baum & Co.Yellowstone Partners LLC ◦ Jeffries & CoZions Wealth Advisors DBA for ◦ JP Morgan Securities, LLCContango Capital Advisors Inc ◦ LPL Financial LLC ◦ Merrill Lynch, Pierce, Fenner & Smith ◦ Morgan Stanley Smith Barney ◦ Raymond James & Associates, Inc. ◦ RCB Capital Markets Corp. ◦ Sterne, Agee & Leach, Inc. ◦ UBS Financial Services Inc. ◦ Wells Fargo Advisors LLC ◦ Wells Fargo Securities, LLC Certified Dealers: Recognized by the Federal Reserve Bank of New York Certified Advisors: Registered under Section 203 of the Investment Advisers Act of 1940

8 Money Management Act Requires liquidity ◦ Laddering investments allows for liquidity Outlines approved investment instruments that are rated "A" or higher or the equivalent of "A" or higher, by two nationally recognized statistical rating organizations one of which must be Moody's Investors Service, or Standard and Poor's; ◦ CDs ◦ Repurchase Agreements ◦ Commercial Paper (Commercial Bonds) ◦ US Treasury Obligations ◦ Other obligations of Federal and State Governments.

9 Short-Term Investments (Cash) RisksHow to mitigate the risks Market risk- Rise in interest RateHold to maturity Headline risk- Bad press in a segmentDiversification <5% in each segment Liquidity risk- Sell before maturityLadder the investments AdministrativeUse Certified Dealers only General market riskFollow recommendations given by Certified Dealer and Advisor’s research teams

10 Reward vs Liquidity Risk Time Yield Short-term Investments  Bank Deposits  Money Markets  Overnight Funds Possible additional yield By actively layering liquidity over time Intermediate-term Investments  CDs  Treasuries  Agency Bonds  Corporate Bonds

11 What are other Universities doing for Cash Management? U of UUSUWSUSLCCUVUSNOWDIXIESUU % in PTIF 10-13%<10%50%25%100%34%100%66% % of time spent managing investments 10-15%30%10% 0%15%0%5% How far out– Maturity dates <5 Years <2 YearsLiquid<5 YearsLiquid<3 Years Safekeeping Wells Fargo Zions & Wells Fargo PTIF Zions & Wells Fargo PTIF Wells Fargo Certified Dealers and Advisors (Brokers) Wells Fargo Zions, Wells Fargo, George K Baum, Smith Wells Fargo Zions, Wells Fargo, George K Baum N/A Zions, Wells Fargo N/A Wells Fargo, George K Baum

12 What are other Universities doing for Cash Management? U of UUSUWSUSLCCUVUSNOWDIXIESUU Dedicated Cash Investment Manager NO Background?FinanceAccEconAcc Short-term investment amount ? $1 B$285 M$100 M$85 M$100 M$20 M $60 M Types of investments? US Treasuries, Federal agencies, repurchase agreements Bank CDs, corporate bonds, corporate floaters Bank CDs, Federal agencies Bank CDs, corporate bonds, corporate floaters PTIF only State & Local government bonds, Federal agencies, corporate bonds PTIF only Bank CDs, Corporate floaters, Federal Agencies

13 What are other Universities doing for Endowments? U of UUSUWSUSLCCUVUSNOWDIXIESUU Dedicated Endowment Manager? YesNoYesNo Small Endowment NoYes % of Job100%50% Endowment, CM, Foundation <20% of Time 15% Part of Director of Acct Duties 5% (all with U, ½ basis point charge) 95% (Entry level Accounting)

14 Options Available OptionsCosts Continue with current PTIF Strategy Opportunity Costs- $500, ,000 Hire an Investment Manager $75, , ,000 = $136,000 Salary + Benefits + Bonding *Use Wells Fargo as part of our current banking contract Fees + Commission deducted before yield is computed Request for proposal (RFP) Opportunity Costs- 4-6 months *Administration recommends using Wells Fargo and one other Certified Dealer, following the State Money Management Act “We haven’t looked at entertaining the use of an (in-house) advisor because it is difficult under the limitations of the Act to get a return large enough to cover the cost of the hiring of an (in-house) advisor.” - Mel F. Smith, Manager – Banking & Operational Investment, University of Utah


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