Barucki Looks to Corporate Bonds

By Ted Ayala

On Tuesday night, the Glendale City Council voted in favor of giving the city treasurer a freer hand in investing the city’s nearly $400 million portfolio in corporate bonds in a bid to preserve its value until the economy recovers.

The move came as City Treasurer Ron Barucki urged the city to make the move as his options with federal bonds are becoming more limited.

“What we need to do is find new investment categories to help provide us the investment options we need,” he said.

Expanding the city’s opportunities for investment, namely in corporate bonds, is seen as a hope to preserve its savings.

Calling attention to the need to diversify the city portfolio, it was noted that over 50% of Glendale’s portfolio is dug into federal agency bonds such as Fannie Mae and Freddy Mac. But both organizations have issued fewer bonds as they recover and reconfigure their operations after the blows they suffered during the 2008 housing market crisis.

Under the new regulations, the city can now hold up to 20% in corporate bonds – an increase from the former 15% threshold.

Corporate bonds, noted Barucki, are riskier ventures, but ultimately provide the greatest possibility of returns on the initial investments.

Though the measures are being implemented as an aid until the economy improves, Barucki noted that the economy, according to the Federal Reserve, isn’t looking to improve for at least another two years.

“I’d never bet against them,” he said.

He also reaffirmed the need for the city to take more risks with its portfolio.

“For a city the size of Glendale to shut itself out from these kind of investment opportunities [is] not the right approach. But we’ll be taking it slow. A studied approach – that’s what I recommend.”