Parsing the Statistics in the Treasurer’s Race

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At lease one letter to the editor has disparaged the performance of city treasurer, Laura Parisi, by citing low current investment returns or a supposed poor performance compared to five year CD rates. This criticism is misguided and unwarranted.

City funds must be invested to allow for cash flow demands of city operations. This means a chunk of the portfolio must always be immediately available. Other chunks must be available for use periodically during the coming months and years. To meet these continual demands, prudent portfolio management requires funds be invested in a spectrum of maturities. Further, by law no investment maturity may be longer than five years. So if managed properly we should expect average portfolio maturity to be about two and a half years. It is currently 2.3 years. Further, both state law and city regulations require investments only in the safest instruments. Therefore, a fair benchmark is not five year CDs, but two year treasuries.

Return on investable funds as of the latest report, June 2016, was 1.12% as reported in the latest Treasurer’s monthly report. This soundly beat the two-year treasury benchmark of 0.58%. Impressively, at no time during the previous 12 months did this benchmark ever reach the 1.12% of Laguna’s portfolio.

Still, one data point is a shortsighted measure either of investment returns or of a manager’s performance. During Treasurer Parisi’s 17-year tenure, returns reported as of each June 30 for funds under her management have averaged a 2.74% annualized return compared to 2.24% for the benchmark. Furthermore Laguna’s portfolio has experienced lower volatility than the benchmark. Achieving higher returns with lower volatility is the gold standard in investing. By these appropriate measures Laguna’s portfolio has excelled.

While the performance has been superior, it has not been miraculous. These numbers reflect what happens when a proper diversification of investment type and duration is instituted and maintained. In this, our incumbent city treasurer has served Laguna very well indeed. I commend Treasurer Laura Parisi. I will be voting for her in November.


Tom Halliday, Laguna Beach


The author holds a master’s from the Wharton Business School and is a former corporate chief executive and financial officer.



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