Experts confirm Council investments are safe
31 August 2007
Independent financial experts from Westpac and Grange investment advisors have confirmed that the Collaterised Debt Obligations (CDOs) used in the investment strategy undertaken by Port Macquarie-Hastings Council are not exposed to the sub-prime mortgage market in the United States.
The CDOs used in Council's investment portfolio are corporate entities that are diversified globally across a wide range of industries and regions with none in sub-prime entities.
Council's investment policy is within the guidelines provided by the Department of Local Government. These have proved hugely successful and have out performed industry benchmarks.
"In the past five years, these investments have earned more than $6.3 million dollars interest above benchmark with our total investment income of approximately $31.5 million dollars," Port Macquarie-Hastings Council General Manager, Bernard Smith said today.
"Council has $25 million investments in Collaterised Debt Obligations (CDOs) which are all rated AAA to AA- by independent investment agencies such as Standard and Poors. We have invested in CDOs based on the rating agencies providing Council with investment grade ratings, which is a stipulation of the Department of Local Government.
"These are highly rated and we expect a continued high return on our capital, Mr Smith said.
"Just like mum and dad investors using the stock market or real estate investments, these are long-term investments and just like the stock market and real estate markets, there are variations in short-term performance, but strong performance and dividends in the long term, Mr Smith said.
"While there has been fluctuations in the equity market, this is beginning to show signs of a recovery. Council believes as long as we hold onto our CDOs until maturity, they are secure and will deliver us better than average returns on our investments.
"As for the comments by the CEO of the lobby group NSW Urban Taskforce that all councils shouldn't have money invested at all, that's like saying mums and dads shouldn't plan for their future or have money in the bank. It's an absurd financial and planning strategy for a group that wants to be taken seriously," Mr Smith said.