County hires investment pro

Company will provide advice; treasurer’s office will keep control of funds

KINGMAN - The county will have outside help in picking its investments.

The Board of Supervisors approved by a 2-1 vote the hiring of Davidson Fixed Income Management from Phoenix Monday. The firm will advise the county on where to place its investment pool funds. The investment pool contains funds from the county and from local schools, fire districts and improvement districts.

Supervisor Buster Johnson was opposed. He asked the Board to put off approving the request for two weeks in order to get a better grasp on the information supervisors had been provided.

The Board instead voted to approve the hiring of Davidson.

The County Investment Advisement Committee put out a request for proposals in February for a financial investment advisor for the county and received two responses. The committee recommended Davidson to the Board on Monday.

According to Neal Helm, vice president of Davidson, the company will only advise the county as to which funds to invest money. It will not work directly with investment brokers or control any funds from the county. The County Treasurer's Office will retain all control of the funds.

How much Davidson will be paid for its services depends on how much of a return the county gets from the investments. Davidson will receive 5.5 basis points or about 1/100 of 1 percent of any return the county gets on its investments, Helm said. The average money market fund takes approximately 18 to 40 basis points as payment.

The county currently has $225 million in investments, most of them in the Arizona State Treasurer's Local Investment Group Pool, which is a collection of funds from counties and cities from across the state, said County Treasurer Melissa Havatone.

The LIGP takes approximately six basis points as payment.

Davidson can help the county tailor its investments to the safest funds with a maximum return and still have some freedom to use the funds without having to pay hefty fees, Helm said.

"This will go a long way to repairing some of the problems and some of the risk we've had in the past with the investments," said County Manager Ron Walker, referring to questions raised last year about the investment strategy of former Treasurer Lee Fabrizio. In late 2007, the Treasurer's Office invested approximately one-third of the local investment pool funds into corporate bonds. By September 2008, the bonds had lost around 19 percent of their face value. The office had also invested $5 million into Lehman Brother bonds. The company filed for bankruptcy last year.

In the process, two investment brokers from Merrill Lynch earned $338,837 in commission by selling the bonds to the county.

The Board created the Investment Advisement Committee in October to advise the Board and the Treasurer's Office to help choose an investment advisor. Members include the county manager, the county finance director, the office of management and budget director, the county treasurer and the deputy treasurer.