Chicago’s Investment Income Set to Nearly Double, Treasurer SaysBy
Investment revenue on track to reach $102 million this year
Diversification and less cash bolstered returns, Summers says
Chicago’s investment portfolio is on track to earn nearly twice as much as it did last year as increased diversification and less cash on hand boosts revenue, according to projections from Treasurer Kurt Summers.
The assets managed by the treasurer’s office -- which vary from $6 billion to $7 billion throughout the year -- have earned $56.7 million in the first six months of 2016 and may return a total of $102 million by year-end, according to Summers. That compares to $57.9 million in 2015. Since Summers came into office at the end of 2014, he and his team have moved some of the city’s roughly $3 billion of cash into other investments.
“The benefit of diversification, the benefit of technology, the benefit of new people and new processes, leads to an outcome like this,” Summers said in an interview on Tuesday.
The returns give a modest bit of financial relief to Chicago, which has a junk credit rating from Moody’s Investors Service because of its $34 billion debt to city workers’ pension funds. More than 35 cents of every dollar of the budget goes to pay debt and retirement costs, according to Moody’s Investors Service. The city is projecting a 2017 budget gap of $137.6 million, the smallest since 2007.
“In the coming budget process what you’ll see is a real opportunity for revenue that previously just wasn’t even on the table,” Summers said. "It will be substantial and now it can be a part of the solution to solve what’s been a systemic budget deficit year after year after year.”
Under Summers, the investment portfolio has a more diversified mix of holdings from government-sponsored agencies, municipal bonds, corporate debt and other instruments, he said. He also extended the duration of some investments to capture higher yields.
“We went from just a pool that was there to generate additional revenue for the corporate fund to really a kind of focus on total return and asset growth,” he said.