RELEASE: Treasurer Summers Announces Investment Policy Changes to Improve Quality of the City’s Portfolio

Changes Approved by City Council Have Potential to Help Earn an Additional $10.1 Million in Income Next Year;
Implements City’s First-Ever Minimum Credit Quality Rating

Chicago City Treasurer Kurt Summers today announced that his proposed changes to the City’s investment policy have passed the full City Council. These modifications will improve the investment quality of the City’s portfolio by implementing a first-ever minimum credit quality rating and have the potential to earn an additional $10.1 million in income for 2016. Changes will also ensure the Treasurer’s Office has greater accountability to Chicago’s taxpayers with new reporting. The policy update was introduced by Mayor Emanuel at the July meeting of the Chicago City Council.

“For the first time ever, we’re implementing a minimum credit quality rating to protect taxpayer dollars and properly manage the City’s risk,” Treasurer Summers said. “These changes are modeled on best practices in today’s markets that will allow us to maximize our portfolio. As the City’s investor, providing the public with a timely report on our portfolio is a top priority that will help ensure the residents of Chicago and our elected officials throughout the City have a very clear picture of where our investments stand on a regular basis. I thank Mayor Emanuel and the members of the City Council for their support on this effort.”

Consistent with the regular practice of recent years, the Treasurer’s Office recently evaluated the current investment policy relative to market conditions, best practices, asset protection and investment quality.

Changes to the investment policy proposed by the Treasurer were designed to ensure that the City is investing its assets in the best securities possible to maximize returns while effectively mitigating risk and maintaining required levels of liquidity.

The proposed modifications include:

  • Protecting Taxpayers: Limit holdings in securities that have exhibited increased volatility or whose limited sector coverage impedes the transparent flow of information. This includes setting a minimum credit quality standard for the City’s portfolio at an overall average rating of Aa1 or better to be reviewed on a quarterly basis.
  • Increasing Transparency and Accountability: Mandate that the Treasurer’s Office report to City Council and the public on a regular basis in order to collect important feedback regarding the City’s investment strategy and ensure timely review of policies given current market conditions.
  • Improving Investment Quality: Allow the office to pursue further diversification and enhanced earnings while securing the credit quality of the City’s investment portfolio. That includes allowing for investment in corporate bonds of A- rating or higher by at least two accredited ratings agencies and a maturity no longer than 30 years to comprise up to 25% of total holdings. The new changes also limit the City’s exposure to municipal bonds in order to reflect the lack of analysis and the deteriorating posture of this asset over the last decade.