As a county treasurer in a neighboring county, I can confirm that Delaware County Treasurer Don Rankey has implemented a sound investment strategy for Delaware County. Delaware County’s investment strategy is similar to the approach Union County has taken, which actively diversifies the investment portfolio depending on the anticipated changing interest rate environment. That means that in a rising rate environment, higher liquidity and shorter duration will provide the best short-term returns and in a flat or declining rate environment, extending duration will provide the best returns. As of today, diversifying the investment portfolio and extending the duration will provide for sustained positive returns. The above are prudent measures to maximize returns while mitigating risk, especially in the face of potential interest rate declines.
Regarding Star Ohio; Star Ohio is an excellent fund and it provides market returns on a short-term basis. It’s similar to a money market account that moves with the daily market interest rate. If the county was solely invested in Star Ohio in March of 2020, for the next 2 years the return on those investments would have been close to 0% (for example the 30 day yield for January 2022 of Star Ohio was .1%). Therefore, having a portfolio with a higher duration prior to March of 2020 would provide a higher rate of return.
Duration or the amount of time until an investment matures are critical elements. Having sufficient liquidity to take advantage of rising rates, takes active management. Hindsight is always 20/20, but a balanced portfolio provides for the best opportunity to maximize yields In a rising interest rate environment (starting about March of 2022). Both Union and Delaware counties were well positioned starting mid-year 2022 having a great amount of liquidity and short-term maturities to take advantage of rising rates. As liquidity increased and duration decreased during 2022 and 2023, each were in a position to take advantage of the rising rate environment. As interest rates changes have flattened and even declined in some categories at the end of 2023 and now in 2024; longer duration is starting to be preferable.
Regarding “Unrealized Losses,” any portfolio consisting of fixed interest rate securities will have “unrealized losses” in a rising rate environment (regardless of the maturity date). Since counties are not in the business of hedging or buying interest rate swaps, investments are held to maturity. When held to maturity fixed interest rate investment will pay the “face” value as such there will be no “realized” loss. The fact that the Delaware County Treasurer’s Office has not incurred any losses on its investments and has seen historic returns is a testament to the effectiveness of Treasurer Rankey’s strategy.
Treasurer Don Rankey has demonstrated an extremely high level of competence and prudence in managing Delaware County’s finances, exemplified by the endorsements from Ohio Treasurer Robert Sprague and Ohio Auditor Keith Faber.
Andrew Smarra
Union County treasurer
