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CU Snapshot

 October '18September '18
# of CUs5,6475,653
Total Assets
($ billions)
Total Savings
($ billions)
Net Cap.
Loans to Savings85.8%85.5%
Loan Delinq.0.6%0.7%

         Credit Union Indicators

Top-notch investment portfolio management tips

Manage liquidity and interest rate risk and improve earnings, says The Baker Group's Ryan Hayhurst.

Net-interest margins remain near 15-year lows, says Ryan Hayhurst, managing director of The Baker Group.

He advises using investments to boost the bottom line.

Consider these six characteristics of high-performing investment portfolio management:

  1. Use the investment portfolio to fight margin erosion. "The bond portfolio is the only place we can increase margin without hurting the membership," Hayhurst says.

  2. Define, measure, and manage. Define your portfolio objectives and risk tolerance, measure your risk exposure, and manage your risk. "Actively manage the portfolio in the context of your balance sheet," he says.

  3. Develop a written investment strategy. "Build a portfolio," Hayhurst says, "don't be sold one. Be proactive, not reactive, with a disciplined investment strategy."

  4. Diversify the portfolio across sectors and within sectors. Each sector has its pros and cons. Diversification protects against a range of interest-rate scenarios, he says.

  5. Minimize cash and certificates of deposit (CDs) in favor of bonds. "High-performance portfolios tend to own less cash and CDs, and more mortgage-backed securities and CMOs [collateralized mortgage obligations]," he says.

  1. Build a portfolio of stable, predictable cash flow. "Steady, consistent cash flow is the best natural hedge against rising rates," Hayhurst says.

In short: "Stay diversified, focus on mortgages, and find the best relative value."