September 4, 2013 9:56:57 AM
Nathan Gregory - [email protected]
Two firms will watch over Lowndes County's $30 million nest egg for a 30-month trial period.
After a day of hearing presentations from three financial consulting companies, the Lowndes County Reserve and Trust Fund Board of Trustees voted unanimously Tuesday to select Stephens Capital Management and Renasant Wealth Management to manage and invest the money from the county's hospital sale.
Details of the contracts with the two firms have not been finalized. Based on the fee schedule each firm provided in the scenario of managing $15 million, however, Stephens would charge $87,000 and Renasant would charge $86,625.
Stephens, based out of Little Rock, Ark., oversees the Arkansas Local Government Management Trust, an investment vehicle legislators of that state created in 1996 to allow municipalities across Arkansas to pool excess cash into one trust to earn more interest.
Renasant Wealth Management, based out of Tupelo, has $2.5 billion in assets under its advisement, including $833 million in investment management. It is a portion of Renasant Corporation, which has more than 100 banking locations in four states.
The other firm to interview was Wells Fargo Advisors.
The reserve fund trustees are all five Lowndes County supervisors.
Financial consultant Bob Bradford of Pickett, Bradford and Associates in Jackson, guided trustees through the process of narrowing down 12 proposals to three finalist to be brought in for interviews. The two firms selected have differing investment philosophies but share the same objective of growing the trust fund, he said.
"Stephens invests in portfolios of exchange traded funds that emphasize low cost and returns that track very closely to many of the indicies that others use to track their performance also," Bradford said. "Renasant has a somewhat more traditional approach -- because ETFs are only about 10 years old -- of using stocks and bonds. They do that by selecting institutional managers who aggregate large sums of money and invest either in stocks or bonds or other permitted investments."
In an effort to protect the funds and Lowndes County residents, the board wanted to see both approaches in action, committee president Harry Sanders said.
"I think that's a trade-off we have to do to have some diversity and to have some competition," he said. "They're not going to want to let the other one beat the other one. They're not going to overly gamble or take shortcuts, but they're going to pay better attention."
Trustee Leroy Brooks made the motion to have each firm have a stake in managing the money, noting Stephens' wealth of experience and Renasant's local interest.
"You get a chance to evaluate," Brooks said. "It's almost like you've got a giant over here, and over here you've got something kind of homespun."
"Stephens has significantly more governmental money with counties under management than Renasant, but in proportion to size, Renasant hold its own very well," Bradford said. "Both have good experience and good capability."
State legislation allowing the county to create a reserve and trust fund for the hospital was passed earlier this year as a means of providing more vehicles through which to invest the money. The county had previously only been able to invest the funds in certificates of deposit, which had been accruing only $60,000 a year in recent years.
The next step, which Sanders said would likely happen in October, is for the county to draft investment policy statements to have the firms sign. Those documents determine parameters the firms operate under in terms of investment vehicles and are crucial to how much the county will benefit long term, Bradford said.
"(The investment policy statements) says whoever is investing the money, this is what we expect you to do. These are the limits we place," Sanders said. "This is the amount of bonds or stocks. It outlines a whole wrath of limitations and expectations. Both firms will come to that document and both of them will bring their expertise in investing to both of those documents. People tend to focus on previous returns and fees, but 91.5 percent of the return that you get comes from the investment policy statement. The fees that are charged are not that significant when you look at the big picture. The investment policy statement sets the direction as to where you're going to go."
Before the hospital fund trustee interview sessions, the board of supervisors held their regular meeting. Board action included:
■ Contracting TLSL Construction in Walnut to rebuild a bridge on Potts Road for $596,157. The initial estimate for the project was $441,116, but TLSL's sealed bid was the closest price. Bids from Gregory Construction and Ausbern Construction were $774,349.10 and $649,605.70, respectively;
■ Taking under advisement a budget request of $150,871 for the Mississippi District 4 Health Department;
■ Accepting Mitchell Drive as a county road. The road was previously private;
■ Relocating Renon Lane.
For a full recap of the supervisors' meeting, see Thursday's edition of The Dispatch.
Nathan Gregory covers city and county government for The Dispatch.