Preview: An interview with Mike Jensen

As part of Room151’s forthcoming Public Sector Treasurers’ Handbook, we spoke to Mike Jensen, chief investment officer of Lancashire County Council, about how to generate a higher yield on your treasury investments while maintaining a robust risk profile, the economic crisis since 2008 and a new era in global markets and risk management. The Handbook will be published towards the end of May with the full, exclusive interview but until then, here’s a sample of what Mike had to say.

On generating over 30% yield on treasury investments in 2011/12:

“Stage two was recognising that if we wanted to improve the quality of our counterparty list we needed to move away from the traditional bank deposit model and towards lending to institutions that were sovereign, quasi-sovereign or had a good deal of sovereign support.”

“The series of positions we took was purely based on risk reduction for the authority, namely credit risk reduction and yield curve risk reduction.”

On investing in the treasury function:

“There are 45 Bloomberg licences in local government and a handful of local government pension funds count for almost all of them. So you’ve got to invest in hardware and the people who can give you quality information but actually you’ve just got to start doing some very simple things too.”

“There’s nothing to stop authorities from developing relationships with the banks behind the brokers, the bond desks and the strategists from banks/fund managers  who are producing research pieces of a very high quality that are extremely relevant to the  day-to-day money management activities of authorities.”

On PWLB loans:

“I spoke to HMT about…18mths ago and put forward the idea that we should be opening up a secondary PWLB loan market. If we’re reaching the statutory limit on PWLB borrowing – there’s a strong case for pushing the secondary market idea harder still.”

On the economy:

“There’s a good chance we’ll get another base rate cut to 25bps or 0%. What does that do to three month LIBOR rates? What will it do to the rate the DMO will pay on the DMADF? That’ll have to go somewhere close to zero.”

“I really don’t think the man in the street realises, or perhaps even some market participants for that matter, just how precarious the banking system was (in 2010/11).  Major French, Spanish, Italian and regional/mortgage German banks were perilously close to failure and if one or more had collapsed we could have been looking at a complete systemic failure that could not have been coped with.”

On Iceland:

“The lessons were flagged up by the Treasury Select Committee but who should have been taking those lessons forward? The individual authorities to a certain extent but clearly they were handicapped insofar as they didn’t necessarily have the market experience and connections.”

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Local authority treasury departments will receive a free copy of the Handbook. Private sector firms who would like to pre-order their HALF-PRICE copy may do so HERE at the *reduced rate.

*Offer lasts until May 31, 2013, subject to availability.