I read with interest your Sept. 16 editorial, "Local mandates." I couldn't help but have mixed feelings regarding you statements.
In 1995 the state of Florida passed a mandated requirement for a written investment policy for all governmental units within the state or face severe restrictions on investment opportunities. The law created no great stir among the local governments and the vast majority proceeded to write, and have approved by elected officials, exceptional documents which have generated awareness among the citizens and their elected representatives.
Having said all that, I would like to draw your attention to a proposed standard currently being posed by the Governmental Accounting Standard Board that would require that all "fair-value" changes in governmental investments be reported in the operating statements of all governmental entities throughout the country.
Currently, market changes in pension assets are "booked" and should be, due to the nature of the corresponding pension liabilities. However, to require that fair-value changes be presented in the budgetary controlled operating statement is inconsistent with the nature of these funds. The consequences of this accounting standard will be to force government to invest in short-dated less market volatile investments.
You commented in the editorial about stewardship of citizen assets and our lack of money management understanding creates problems that can be resolved with proper investment education and strict policies. However, the Governmental Accounting Standard Board believes that an accounting standard supported by the auditors, rating agencies and the SEC indirectly is the only cure to the presented problem. It will almost surely require overnight liquidity in governmental investments. How many millions of dollars in lost opportunity will such a standard force on the governmental entities of the coundtry:
Jeffrey G. Spies
Treasurer
City of St. Petersburg
Pensions & Investments routinely reports the universe results for non-U.S. portfolios. One recent report (Sept. 2, page 14) on the WM Non-U.S. Universe proudly states that results are "based on data from 127 U.S.-based portfolios with total assets of $20.5 billion." This may appear to be a robust universe, but in actuality it is quite meaningless.
The size of the non-U.S. market exceeds $10 trillion. Using a $20.5 billion sample to evaluate non-U.S. performance is like using two stocks in the Russell 1000 to evaluate U.S. performance -- $20.5 billion is less than 0.2% of the non-U.S. market.
I recognize that the WM universe is among the largest available, but therein lies the problem. There are no good peer groups available for evaluating international managers. However, there is an excellent technology available that overcomes this problem. Portfolio opportunity distributions are universes of computer-generated portfolios constructed as all possible funds that could be held across the $10 trillion non-U.S. market. As su
