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It's a long report. I am already jaded with this epic and sluggish financial wreck.
Public School Funds Hit by SIV Debts Hidden in Investment Pools
By David Evans
Nov. 15 (Bloomberg) -- Hal Wilson smiles at the blue numbers on his desktop screen. His money is yielding 5.77 percent. For the chief financial officer of Florida's Jefferson County school board, that means the $2.7 million of taxpayer funds he's placed in the state's Local Government Investment Pool is earning more on this October day than it would get in a money market fund.
...
It may be easy, but it's not risk free. What Wilson didn't know in October -- and what thousands of municipal finance managers like him across the country still haven't been told -- is that state-run pools have parked taxpayers' money in some of the most confusing, opaque and illiquid debt investments ever devised.
...
Thousands of school, fire, water and other local districts across the U.S. keep their cash in state- and county-run pools. These public accounts, modeled after private money market funds, are supposed to invest in safe, liquid, short-term debt such as U.S. Treasuries and certificates of deposit.
...
Public fund managers say they've bought SIV debt because it had the safest credit ratings and offered higher yields than other short-term fixed-income investments.
SIVs, many of which are assembled by London-based bankers, had a low profile until some of them collapsed. The $7 billion Cheyne Finance SIV, incorporated in Delaware, defaulted on Oct. 17.
...
`It's Not Transparent'
He says the pool has become more conservative after managers learned not to place too much trust in credit ratings. ``Once burned, twice shy,'' he says. ``We're not the only participant in this market that's had a mind-set change as far as credit rating agencies go.''
Now, local investment pool managers like Sheets, once lured by the big returns from hard-to-comprehend SIVs, are going back to the basics of investing: Do your own research. Remember that higher returns bring more risks and top credit ratings can be misleading.
By David Evans
Nov. 15 (Bloomberg) -- Hal Wilson smiles at the blue numbers on his desktop screen. His money is yielding 5.77 percent. For the chief financial officer of Florida's Jefferson County school board, that means the $2.7 million of taxpayer funds he's placed in the state's Local Government Investment Pool is earning more on this October day than it would get in a money market fund.
...
It may be easy, but it's not risk free. What Wilson didn't know in October -- and what thousands of municipal finance managers like him across the country still haven't been told -- is that state-run pools have parked taxpayers' money in some of the most confusing, opaque and illiquid debt investments ever devised.
...
Thousands of school, fire, water and other local districts across the U.S. keep their cash in state- and county-run pools. These public accounts, modeled after private money market funds, are supposed to invest in safe, liquid, short-term debt such as U.S. Treasuries and certificates of deposit.
...
Public fund managers say they've bought SIV debt because it had the safest credit ratings and offered higher yields than other short-term fixed-income investments.
SIVs, many of which are assembled by London-based bankers, had a low profile until some of them collapsed. The $7 billion Cheyne Finance SIV, incorporated in Delaware, defaulted on Oct. 17.
...
`It's Not Transparent'
He says the pool has become more conservative after managers learned not to place too much trust in credit ratings. ``Once burned, twice shy,'' he says. ``We're not the only participant in this market that's had a mind-set change as far as credit rating agencies go.''
Now, local investment pool managers like Sheets, once lured by the big returns from hard-to-comprehend SIVs, are going back to the basics of investing: Do your own research. Remember that higher returns bring more risks and top credit ratings can be misleading.
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