County Treasurer Has Confidence in Investments
The manager of Ventura County’s $700-million-plus investment portfolio says there’s no danger that it will suffer massive losses like those taken recently in Orange County.
The investment portfolio, which is managed by Ventura County Treasurer-Tax Collector Harold S. Pittman, and a separate $900-million county employees pension fund, are both in good shape and earning respectable returns, he reports.
Pittman does not manage the pension fund but helps guide it as a member of the county retirement board.
The investment portfolio is made up of the cash reserves of about 20 school districts and other public agencies, including the county government.
Neither of the Ventura County aggregations includes any investments in the complex derivative instruments that have been blamed for most of Orange County’s estimated $1.5 billion in losses, Pittman said.
Until less than a year ago, derivatives proved highly profitable for the Orange County fund, providing a yield about 2% above that earned by Ventura County’s investments.
“It all gets down to the old rule: The greater the yield, the greater the risk,” Pittman said.
He expressed sympathy for Orange County’s former treasurer-tax collector, Robert L. Citron, who used derivatives to bet that interest rates would continue to fall, bolstering the yields of highly volatile “inverse floater” derivative bonds.
“I know him. He’s highly knowledgeable,” Pittman said of Citron. “He simply became too concerned with seeking high returns.”
When interest rates started to climb, Citron was left with $8 billion in derivative bonds whose yields were falling quickly. Citron resigned under pressure last week.
“For several years, he was considered a hero,” Pittman said. “Some people probably wondered why our relatively small fund didn’t do as well as they were doing in Orange County. We were sticking with conservative things like Treasury bonds and high-quality commercial paper.”
Despite its conservative approach, Ventura County’s government portfolio has grown from about $450 million six years ago to between $700 million and $750 million now, Pittman said.
The county government agencies’ investment fund will earn an overall yield of about 5.25% this year, Pittman estimated. And he expects the employee pension fund, which invests in blue-chip stocks as well as debt instruments, to show a gain of more than 8%, even though it’s had some setbacks recently due to the stock market’s slide.
Besides avoiding derivatives, Ventura County’s investment managers also eschew leveraging--the risky practice of investing with borrowed money, Pittman said.
Reportedly, most of Orange County’s $20-billion portfolio represented borrowings, leading to a debt load that now threatens to overwhelm the fund.
“It’s questionable whether some of the Orange County practices were authorized by the state code. But whether they were or not, I don’t consider them appropriate ways to use county money,” Pittman said.
Ventura County’s investment pool also refuses to accept investments from outside the county, Pittman noted. To the contrary, he said, until its downfall, the Orange County fund was considered such a high flyer that outsiders from such areas as Los Angeles and Santa Barbara counties signed on.
Pittman, a former deputy county treasurer-tax collector, was appointed to his present post two years ago. He won a full four-year term in the Nov. 8 election.
