MANSFIELD — Birds flying high, sun in the sky and breeze driftin’ on by — Richland County Treasurer Bart Hamilton summed up his thoughts on the county’s investment earnings with a Nina Simone lyric.
“I’m feeling good,” Hamilton said during meeting Tuesday morning. “I’m feeling real good.”
Hamilton met with county commissioners for a quarterly investment advisory board meeting. Jim McCourt, a certified financial analyst with Meeder Investment Management, also attended the meeting to share an investment strategy update.
Meeder Investment Management is the investment advisor for the State Treasury Asset Reserve of Ohio (STAR Ohio), where much of the county’s short-term investments are located. Meeder also manages long-term securities on the county’s behalf.
Hamilton said the county invests unused funds from across its departments in a diversified portfolio. Every year, the interest earned on those investments is put back into the county’s general fund.
As of Nov. 30, the portfolio has produced $3,913,772.50 in interest for the county general fund this year. Hamilton informed commissioners the county’s investment rate of return is currently 2.6 percent with an average maturity of 2.34 years.
“It’s been a record year,” Hamilton said. “As I look back in time, it’s an all time record as far as I can see. Of course, our numbers don’t go back forever.”
Much of the county’s recent earnings are from the STAR Ohio, an investment pool administered by the Ohio Treasurer’s Office that allows government subdivisions to invest in high-yield, short-term securities.
The weighted average of STAR Ohio investments is less than 60 days, but many are as short as one day.
Because STAR Ohio invests in “extremely short-term” funds, McCourt said interest rates tend to correlate with rates from the Federal Reserve. The Fed began hiking borrowing rates in March 2022 in an effort to curb inflation, leading to high yields for lenders.
Playing the long game
While the county has benefitted from this trend, McCourt said the county will need to pivot its strategy to continue taking advantage of high rates. According to McCourt, the Fed stopped raising rates in July and is likely to lower them in the coming year.
In order to lock in high interest rates, the county will likely shift more of its funds to longer-term securities, most likely three- to five-year investments.
By doing so, McCourt said the county can continue to expect high interest revenues even if the Fed cuts rates and yields from STAR Ohio decrease.
It’s a strategy the county treasurer has already begun to deploy.
“Within the last couple of days, Bart (Hamilton) moved $12 million from that STAR Ohio balance into the portfolio to be invested in securities for longer-term investments,” McCourt said.
Despite projecting a decline and flatline in interest rates, McCourt and Hamilton said they’re optimistic about the county’s investment potential in 2024.
“It’s tough to give a hard prediction on it, but I think you have at least a few years of this trending upwards still from the portfolio side,” McCourt said.
“STAR Ohio will start going down, the portfolio is going to continue to trend upward for few years and then the idea is, once that upward trends stops, to stabilize it for as long as possible.
“That’s what we’re doing right now with the extension of the duration and trying to lock in these longer bonds.”
Hamilton said he anticipates the county’s securities will generate $3 million in interest next year, excluding STAR Ohio revenues. But as financial professionals often do, he added a disclaimer.
“It would be hard not to hit $3 million,” he said. “I mean, there’s always the unknowns of what could happen in the economy.
“You’ve got some crazy stuff going on in the world right now. You’ve got two wars kind of going on. Who knows what happens with that?”