Banking & Finance and Government

Not many happy returns on investments — again

County investment pool’s earned interest is typical of the times.

April 5, 2013
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Despite the size of the Kent County Investment Pool, its return rate has been similar to what individual savers have received for at least the last four years due to the Federal Reserve Board’s lengthy monetary policy and continuous global financial problems.

Kent County Treasurer Ken Parrish recently told Kent County commissioners that the $316.3 million in the pool earned about $1.9 million in interest last year, for an average rate of roughly six-tenths of 1 percent.

About $300,000 of those earnings went to the county’s general operating fund, while $1.6 million was earned by the pool. Parrish said the year ended with interest rates averaging .447 percent.

“I’m often asked what kind of earnings we’re getting. Not much,” said Parrish.

Parrish said the pool’s interest rate dropped, in part, because of the recent banking crisis in Cyprus, a calamity that sent more investors to the U.S. market — and that additional investment drove return rates down even further.

Of the investment total, $239.4 million went into certificates of deposit and money-market accounts at 18 local banks. Another $15.8 million of the total was deposited into cash accounts.

Parrish said he uses Bauer Financial Inc. of Coral Gables, Fla., which rates banks and credit unions from zero to five stars, to decide where to invest the pool’s funds.

“You won’t find us in any banks that have zero stars. Most of our banks have ratings of at least 3.5 stars,” he said.

Of the 18 banks, Huntington National, Fifth Third, Comerica, Founders and ChoiceOne were rated at five stars, while The Private Bank, The Bank of Holland and United Bank had four stars. Huntington had the biggest share of the pool’s funds at $41.4 million, or 13 percent of the total. Chase Bank was next at $31 million or 10 percent of the total. There were no credit unions on the list.

“We can invest in credit unions,” said Parrish. “My general practice is, anyone who wants to do business with Kent County has to approach us. In my 16 years as treasurer, I’ve been approached by one credit union.”

Nearly $50.5 million of the pool’s funds were invested in government securities, with $10.7 million in AAA-rated accounts, as rated by Standard & Poors.

Parrish said 25 local governments and governmental agencies invest in the pool. “I believe the largest investor is the Convention and Arena Authority. I believe they have more than $20 million with us,” he said.

Parrish reminded commissioners that he follows county policy when he invests, meaning his priorities are safety, liquidity and yield, in that order.

“Getting an additional five basis points, which is 0.05 percent, isn’t worth the safety risk,” he said.

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