How'd the Big Guys' Investments Do in 2006?

2006 saw ups and downs in the market. How did the top credit unions manage their investments in this changing marketplace?

 
 

The Federal Reserve stopped raising overnight rates in June of last year.  However, long term rates had stabilized much earlier resulting in an inverted or flat yield curve that now dates back to the fall of 2005.  

In this environment many credit unions tended to stay short taking the higher Fed Funds rate, rather than extending out the curve and potentially losing yield. Another factor affecting investment strategy was the liquidity squeeze caused by very low share growth and high loan volume. 

Two Different Looks

The table below looks at investment performance using two calculations.

  1. Yield  This is determined by dividing investment income by average investments over 5 quarter end balances.
  2. Total Return. This calculation, described below, attempts to incorporate 5300 changes in asset value as well as income yield. 

There are limits to both methodologies.   The results are, at best, approximate.  Also when using total return it is often more useful to evaluate outcomes over a full rate cycle, rather than a short twelve month period. 

However, in relying on the “law of large numbers” theory, the overall peer results probably come close to actual performance that could be determined using more refined calculations.  For all billion dollar credit unions, the weighted average total return in 2006 was 4.04% and the yield 3.96%.  The similarity of these two results suggest that credit unions are relatively short and that there has been little fluctuation in investment asset values.

For a complete listing of every billion credit unions, please click on the link below.  If the results appear to be substantially different from your internal calculations, please let me know so we can better understand the limits of 5300 data.

Formula:
(Investment income + change in FASB 115 account +the change in differential between HTM Book value and fair market value +gains from trading+ non-operating gain on investments)/ Average Investments

2006 Top 10 Total Return Investment Portfolios

 

Total Return

Yield on Investments

Average Investments

South Carolina

5.61%

5.40%

111,050,255.80

San Antonio

5.53%

4.27%

61,319,692.20

Credit Union of Texas

5.47%

4.76%

252,549,862.20

PSECU

5.30%

5.13%

779,981,178.00

First Community

5.15%

4.58%

357,992,252.40

American Airlines

5.04%

5.00%

1,738,164,683.40

Alliant

5.01%

4.71%

2,066,445,482.00

Eastern Financial Florida

4.96%

5.46%

571,302,943.40

MidFlorida

4.93%

4.58%

317,888,722.40

Service

4.90%

3.92%

282,002,152.40

See a complete list of billion dollar credit unions.

 

 

 

May 7, 2007


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