City seeks bond manager for $100M reserve

By Collin Gallant on March 7, 2018.

cgallant@medicinehatnews.com @CollinGallant

The City of Medicine Hat treasury is looking for an outside bond manager to actively manage $100 million in cash it keeps in reserve for mid-range projects, the News has learned.

A deadline for interested firms to submit proposals, both in the private and public sectors, passed on Tuesday.

Last year, the city received Alberta ministerial approval to invest in higher-risk, higher-return equities as they were included in Major Cities Investment Regulation.

The new potential portfolio would involve the lower risk bonds the city holds that are still governed by provincial regulations limiting risk and promoting stability.

“It’s intended to cover our medium-term municipal reserves,” said finance general manager Dennis Egert.

The bond fund would include commonly accessed reserves, including the Community Capital, Fleet and Infrastructure Reserve, among others.

Currently, a three-person department within the department handles cash management, and right now, investment is operated on a passive strategy.

A new, “actively managed” bond portfolio would denote more transactions, switching between funds to seek out greater profit.

Such a move can result in better returns, but can also involve higher management fees since more work is involved.

“The investment strategy would remain the same, but do we do the work in-house or have someone else do the management,” said corporate services commissioner Brian Mastel, describing the move to ask for proposals.

Interested parties — almost 70 private bond management firms have indicated an interest on the Alberta public sector tender website, including four local offices — have to detail past performance and potentially negotiable fees.

Administrators have said about $100 million in unrestricted funds related to long-term gas and oil well abandonment would be parked with Alberta pension fund manager AIMCo.

The Alberta Investment Management Corporation was selected to manage those funds last year, and the first year performance update should be included in the city’s 2017 annual report, expected later this month or in early April.