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Meriden Retirement Board
Tuesday – February 13, 2007
Overview
It appears the US economy is roaring ahead, showing upside surprises in GDP and productivity, while energy and labor costs remain in check. Despite jawboning from the Fed, many analysis remain convinced that the next move on interest rates will be down, not up. Homeowners should hope so, since the rising rates of the past three years have started catching-up with adjustable rate strategies. Mortgage defaults are soaring, with foreclosures up 42% last year. Sub-prime lending remains a serious issue, with more than $1 trillion in these riskier mortgages due for interest rate adjustments over the next two years – triple the volume of 2005. Some have suggested the Fed might raise rates to cool their remaining inflation concerns, but we believe this could accelerate a downward housing cycle.
Homeowners may no longer feel free to raid their perpetual piggybanks, but the investment world is awash in liquidity. Interest rates are propelling the rising deal flow, as corporations join private equity firms in acquisitions, mergers, and spin-offs.
Meriden Retirement Funds
The Meriden Retirement funds began 2007 well. After posting a 7.2% gain in the last quarter of 2006, the composite funds have added another $3.2 million, through February 10th. As of last Friday, the funds show fiscal year-to-date gains of 9.4%. The City Employees Retirement Fund totals $134.1 million, and the Police & Fire Pension Funds total $101.7 million. It is instructive to recognize the importance of strong performance during opportunistic times. These Meriden funds began 2006 at $118.3 and $88.3 million, respectively. Composite asset allocation remains 75% in equities, 12% fixed income and 13% in alternative investments such as managed futures and real estate investment trusts.
Investment Sub-Committee
The Investment Sub-Committee manager review begins next Tuesday at 4:00 pm with Armstrong Shaw and Anchor Capital. The following schedule may be changed because of travel issues, but Navellier and Orrell are due March 27th, Neuberger and Roxbury on April 24th, and Templeton and NWQ on May 22nd.
Patrick J. Sheehan
Gerald Hazen Glass
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