Florida Workers’ Compensation Joint Underwriting Association Investment Committee Report
May 23, 2011
The Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Investment Committee (“Committee”) met briefly via teleconference on May 20, 2011 to review the current FWCJUA investment portfolio and hear an investment update by Cutwater Asset Management (“Cutwater”), which provides non-discretionary investment management services for the FWCJUA.
The agenda and meeting materials are attached.
The Cutwater representative explained that the FWCJUA’s overall portfolio of cash and investments is yielding 2.7 percent. Its fixed income portfolio has an effective average maturity of 1.17 years and is rated overall at A/A2.
The portfolio’s value is expected to continue declining in 2011 due to market conditions, the representative noted. The FWCJUA is holding $37 million in cash due to 2011 investment maturities, mostly concentrated in deposit accounts with J.P. Morgan Chase. Cutwater will be moving toward a more active investment policy to achieve better returns. Most of the $60.4 million of cash and maturities during the remainder of 2011 will be re-invested.
“Inflation is the enemy of fixed income portfolios. We are starting to see inflation pick up, and starting to see inventories and goods tick up in prices,” he said. “We want to see if that is going to be passed on to the consumers. It eats into your returns. We are going to keep a close eye on it. We don’t see it being a big problem in the next six to eight months.”
Historically low interest rates will also impact the investment portfolio, the representative said.
“Our strategy going forward – yours has been historically a buy-and-hold portfolio. We want to make sure the portfolio is on the defensive side. You keep the duration of the portfolio a little bit shorter,” he said. “As interest rates rise, it negatively impacts the market value of the portfolio. We can keep the duration a little shorter.”
Cutwater is recommending a one to three-year portfolio duration strategy be employed. No action on the Cutwater update was required.
With little discussion, the Committee then agreed to re-confirm the continued holding of two Lehman Brothers bonds and the CitiGroup bond within the FWCJUA’s portfolio.
Finally, Committee members unanimously approved the following tentative dates for future Investment Committee meetings:
- 10:00 a.m. on August 19, 2011
- 10:00 a.m. on November 18, 2011
- 10:00 a.m. on February 10, 2012
- 10:00 a.m. on May 25, 2012
With no further business before the Committee, the meeting was adjourned.
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