Chicago Returns Rose by $8.2 Million in 2015, Treasurer Says

  • Portfolio under Treasurer Summers earned $57.9 million
  • Summers reduced cash-on-hand by about 40%, boosting returns

Chicago’s investment portfolio climbed by $8.2 million in 2015, beating the previous year’s returns as Treasurer Kurt Summers reduced the city’s cash on hand, according to his office.

The $5.95 billion of city-owned assets managed by the treasurer’s office earned about $57.9 million in 2015, beating the previous year’s returns of $49.7 million, according to data from Summers’s office. Summers reduced the portfolio’s cash holdings by about 40 percent since the first quarter of last year, investing in assets with longer duration and higher yields. Going forward, Summers projects additional revenue of as much as $40 million a year.

“The reality is that Chicago needs it,” Summers said in an interview Tuesday. “We can’t afford not to pursue things like this. Everything we see week to week, month to month, especially about our finances, tell us that we are in a very challenging situation. We want to be a bright light in the midst of that.”

The higher returns come as the third-most populous U.S. city grapples with mounting pension liabilities after years of short-changing its retirement funds. Mayor Rahm Emanuel pushed through a record property-tax hike last year to shore up public-safety pensions. The city still holds the lowest general-obligation credit rating of the most populous U.S. cities, except Detroit. Last week the Chicago’s cash-strapped school district borrowed $725 million at yields as high as 8.5 percent.

Association Standard

In the first quarter of 2015, the treasurer’s portfolio had about $2.9 billion in short-term cash. The Government Finance Officers Association standard is $1 billion, or 45 days worth of cash, according to Summers. This means Chicago had been missing out, he said.

“We basically had three times too much cash sitting in short-term investments not generating anything for the people of Chicago,” said Summers, who will host an earnings call at 12 p.m. local time Wednesday to discuss the 2015 returns.

The treasurer’s office portfolio is made up of funds from the city’s corporate, water and sewer funds, assets in the O’Hare and Midway airport funds and the tax increment financing administration fund, his office said. 

Investment Policy

Summers also implemented a new investment policy last year that gave the portfolio its first-ever minimum credit quality rating to mitigate risk and maintain a required level of liquidity, he said. The overall portfolio’s rating can’t be below AA, the third-highest investment grade. This is “particularly important” at a time when the city has had its own credit challenges, Summers said.

Summers, who grew up on the city’s South Side, previously worked as senior vice president of Grosvenor Capital Management before becoming treasurer and also served as chief of staff to Cook County Board President Toni Preckwinkle.

The most-active Chicago bonds in the past week, which mature in 2029, traded for an average of 108 cents this month to yield 2.9 percent. That’s up from an average of 103 cents to yield 4.1 percent in November, according to data compiled by Bloomberg.

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