Council CDO dips

One of Tumut Council’s troubled investments has dropped a further $82,000 in a matter of four months.

The value of the collaterised debt obligation (CDO) investment known as Kakadu now sits at $260,200, down from $342,200 at the end of July.

The council had invested $1 million in the CDO, which is due to mature next year. It is the last of the CDOs to mature.

The council’s financial advisor, CPG, estimates the council may receive about $200,000 of its initial $1 million by the time the investment is due.

The news came at Council’s finance and strategy meeting held Tuesday, where Cr Peter Cross asked if the council’s financial strategy was on the money, so to speak, given CPG suggested the council’s portfolio was “short-dated” – meaning the council was largely invested in short-term investments.

CPG has recommended the council direct surplus funds into higher yielding, longer-term investments.

Presently, the council’s investment portfolio of $20.7m is made up of about 77 per cent term deposits and 22 per cent at call funds. The CDO accounts for the remaining one per cent.

Council’s accountant Nicole Maxwell said the investments were geared to short-dated options to allow the council better access to its money.

“It all depends on how much risk you want to take,” Mrs Maxwell said. “Who knows what will happen in three to five years time.”

General manager Bob Stewart noted the council was right to be converative, particularly given the losses incurred previous when the council had invested in riskier CDO’s.

“Five years ago the council was not conservative and ran into issues with CDOs,” Mr Stewart said.

“It’s up to councillors how much risk you take, but you’re the ones who will answer to the community when things go wrong.”

Overall, the council’s deposits were yielding about 4.18 per cent, which was about 170 basis points over the cash rate.