The first year for
Porter County Government’s investment of its hospital sale proceeds into its
own nonprofit charitable foundation proved largely successful as it saw a
return rate of eight percent.
“We are no doubt
thrilled with the results to date, especially with the interest rates we
were getting before the Foundation,” said County Council President Mike
board, made up of all members of the County Council and the Board of
Commissioners, met Tuesday for its quarterly meeting to hear the results of
its portfolio performance from investment advisor Capital Cities, LLC.
The market value of
the Foundation’s portfolio was $156,442,784 for the period ending March 31,
compared to the initial investment of about $140 million, said Amanda Black,
CEO of Capital Cities. The Foundation’s first period started on April 1,
For the last
quarter, returns were 3.2 percent, exceeding the benchmark of 2.8 percent,
and boosted the year total to 8 percent. The investment gain for the period
was $4.6 million.
“It’s a really
strong performance,” Black said.
Black said there
were positive returns in the equity markets during the first quarter of the
year, while fixed income returns were much more muted because of
considerable volatility in interest rates there. However, the County’s fixed
income investments grew more than most in the market.
portfolio has about 41 percent in equities and 59 percent in fixed income.
County Attorney Scott McClure said the statute creating the Foundation
limits the amount it can invest in equity.
Black and Capital
Cities senior consultant Corey Waddell presented a fee monitor study that is
done after a year from the investment. The Foundation pays three different
layers of fees -- an investment management fee of $644,372, a $620 custodian
fee and a $65,000 consultant fee to Capital Cities -- totaling $709,992,
That overall fee
total during the past 12 months is “quite reasonable” given the Foundation’s
size and portfolio in its peer group, Waddell said.
McClure said with
Capital Cities getting paid a flat fee of $65,000 with no additional
compensation based on the performance of the investment, the independent
nature of it is working very well.
The “magic date”
presentation, Commissioner Laura Shurr Blaney, D-South, said she realizes
that the return is eight percent now but that might be different by Dec. 31.
That is the “magic date” in the Foundation’s investment policy that McClure
said is the yearly cutoff for whatever interest is made. The interest amount
then resets on Jan. 1.
“I keep hearing a
lot buzz about the money we have now, but we can’t count on it until Dec.
31,” Blaney said.
The earliest date
that interest could be available to transfer into the County’s coffers is
sometime in February, McClure said, because Capital Cities is expected to
take six to eight weeks for the money to become liquid and able to be
transferred in a way that won’t involve fees or penalties.
Rainy Day fund
Speaking on the
concerns addressed by several Council members earlier, McClure said one
issue to explore is the idea of having a rainy day fund for a year with a
He asked Black to
next time give the Foundation scenarios of what a bad or devastating year
would look like. “That way we can start to formulate how much money we need
to set aside for the investments moving forward.”
Black said she can
model different levels of probability based on the Foundation’s spending
“We know that these
returns will not continue forever and we want to be prepared for that as a
Foundation so we can weather that storm when it passes,” added Jessen.
President Jeff Good, R-Center, said Porter County Government is operating on
a $3.8 million deficit per year and has had to rely on other funding sources
to balance its budgets.
“When we are
talking about a rainy day fund, that is what that’s for. It’s for that money
to be in there to run County Government up to two or three years if the
market flatlines,” he said.
The gains from the
hospital sale have staved off tax increases and reductions in County
services, McClure said.
Council member Jeff
Larson, R-at large, asked Black if there is an amount of the returns she
could suggest that can be invested back into the investment principal and
still have money left to bridge funding gaps.
according to statute, any interest abo