OCTA Picks Portfolio Advisers : Investment: The private-sector managers will help decide where to place $1 billion in agency funds.
Moving forward with plans to handle its own investments, the Orange County Transportation Authority on Monday selected five private-sector portfolio managers to help decide where to place nearly $1 billion in agency funds.
The move comes several months after the OCTA board of directors decided to pull out of the county investment pool and handle money management decisions on its own.
OCTA spokeswoman Elaine Beno said the five portfolio management firms will report to OCTA Chief Executive Officer Stan Oftelie and will work under strict investment guidelines approved by the board in February.
The investment policies, designed to minimize risk, set safety of principal and liquidity as top priorities, Beno said.
The OCTA was the second largest investor in the county’s ill-fated pool. The agency had $1.13 billion in the pool when the county declared the largest municipal bankruptcy in U.S. history Dec. 6.
The five firms selected Monday are: Bear Stearns Asset Management of New York; Black Rock Financial Management of New York; Smith Barney Capital Management of New York; State Street Global Advisors of Boston, and Wells Fargo Bank of San Francisco.
Officials said the five firms were needed to meet the OCTA’s money management needs. Three additional portfolio managers were placed “on call” by the OCTA: Fidelity Investments of Boston; Goldman Sachs Asset Management of New York, and Payden & Rygel of Los Angeles.
The OCTA still is negotiating contracts with the five portfolio managers. While details are not set, the firms are expected to receive about twice the compensation OCTA was paying the county, said James Kenan, OCTA’s finance director. The county received about seven cents for every hundred dollars invested.
“We are hiring some highly qualified firms to manage our funds,” Kenan said. “That’s something we obviously didn’t have before.”
The OCTA plans to create three portfolios: a liquid pool to meet daily operating needs; a bond proceeds pool for scheduled freeway construction projects and a short-term operating trust fund pool for commuter rail projects.
The portfolio managers will stay in close contact with OCTA officials and report to the full board of directors on a quarterly basis, Beno said.
Also Monday, the OCTA unveiled a proposed 1995-96 fiscal year budget that is little changed from last year, despite the county’s financial crisis.
The proposed $602-million budget is $8 million larger than last year’s, mainly because the OCTA plans to embark on additional capital projects, officials said.
The budget also calls for elimination of 72 positions. Kenan said most will come through attrition, but some layoffs may be necessary.
The staff reductions were forced in part by OCTA’s decision to have a private firm operate a center to provide information to transit riders.
The OCTA is scheduled to receive 80% of its county pool investment in cash and recovery notes by June 5, with the remainder promised by the county at a later date.
Kenan said potential losses from the pool didn’t have a major impact on the new budget, but will be a factor in long-term planning.
Beno added that while the OCTA lost $24 million in interest earnings because of the financial crisis, the agency wasn’t counting on using the money to balance its budget.
