Treasurer: Riverside County Investments Safe Despite Downgrade

Riverside County Treasurer-Tax Collector Don Kent expressed optimism Monday that Uncle Sam would still make good on his debts--inlcuding those owed to the county.

Roughly $5 billion in assets of school districts and special districts, along with county money, is invested largely in federal debt obligations, City News Service reported.

The tumult on Wall Street triggered by Standard & Poor's decision Friday to knock the nation's creditworthiness down from AAA to AA+ was disconcerting to Kent, but he assured taxpayers there was no "immediate impact" to the Treasurer's Pooled Investment Fund.

"We're not a portfolio that trades daily," he told City News Service. "We're a buy-and-hold investor."

The $5 billion fund is separate from the general fund, which supports government operations.

"I'm not concerned about our getting paid on our investments," Kent said. "As an institutional investor, I'm comfortable."

Roughly 90 percent of the fund's portfolio is tied up in federal debt obligations, including U.S. treasuries, Fannie Mae and Freddie Mac bonds, along with Federal Farm Credit Bank and Federal Home Loan Bank bonds. The S&P downgrade applies to all of those.

All of the treasurer fund's investments are fixed-income, ranging from ultra-short to medium-duration bonds redeemable in five years or less.
  
"The pool is well-positioned," Kent said. "The most important thing for us is to meet our investment objectives based on safety, liquidity and yield. We're doing that. The cash is there to pay the bills."
  
He said that despite equities taking a drubbing during trading Monday--the Dow Jones Industrial Average suffered its worst one-day loss since Dec. 1, 2008, falling 634 points--the bond market saw an influx of buyers as investors sought a safe place to park their cash.
  
That pushed bond prices up and interest rates down. If that trend continues, however, yields on bonds could flatten out, resulting in lower interest earnings on the county's investments.
  
Kent said lower rates are a more likely scenario than skyrocketing rates, which some investment gurus have warned could happen if there's a flight from U.S. debt., generating greater inflationary pressure.

"The reality of the situation is, where are investors going to go?" the treasurer said. "Europe is in extreme turmoil. That's one reason why our market is still a good place to put money."
  
Kent said the nation's indebtedness and the lack of a sound fiscal policy at the federal level worry him more than whether some of the county's investment products pay off.

"The trajectory we're on now is problematic," he said. "The overall health of the economy is at risk.''
  
He declined to comment on the debt deal approved by Congress and signed by the president last week.

City News Service contributed to this report.