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Small CU: Is it time to diversify your investment strategies?

By: Bob Post, VP, Chief Investment Officer

Bob Post September 16, 2014 -- For many small credit unions, investing has typically been limited to purchasing certificates of deposit (CDs) from local banks or perhaps through available rate services. These investments are safe (FDIC insured, if within the insurance limit), easy to account for, and most board members are very comfortable with management investing in them. However, blanket investing in CDs may not be the most profitable option for your credit union. Understanding the current market, and when to consider other investment opportunities could earn higher rates for your institution.

Understanding market impact

Join us and learn more

Want to learn more about alternative investment strategies and options available in the marketplace? Corporate One is hosting a series of educational Investment 101 Boot Camps to help credit unions with less than $100 million in assets, move into potentially higher yielding investment opportunities.

For more information, check out this month’s Investments 101 Boot Camp Solutions article or visit our events calendar.

Jackson, MS
Wednesday, September 24
Miami Lakes, FL
Tuesday, October 28
Tampa, FL
Wednesday, October 29
Jacksonville, FL
Thursday, October 30

When considering CDs for your investment portfolio it is important to know that yields on CDs can often lag those of other investments, on both the upside and downside, for a variety of reasons, such as when Treasury yields change due to economic data, change in Fed policy or other factors. One such factor is the conclusion of bond purchasing by the Federal Open Market Committee (FOMC), currently underway. With this, the expectation is the market will become more focused on other metrics of concern from the committee, such as labor market conditions and data on inflation. Future discussions at FOMC meetings are likely to turn to the timing of possible future rate hikes, and this is likely to bring volatility to the Treasury markets, possibly increasing yields. A return of volatility may provide an opportunity for your credit union to earn a higher rate on U.S. Treasuries and U.S. government agencies than the rates being offered on CDs. U.S. government agency rates are spread above the Treasury rates and usually rise and fall faster than CD rates. And, in a rising rate environment it would be beneficial for your credit union to have other investment solutions available to earn a higher yield.

We can help: Investment options and training available

At Corporate One, we are here to help small credit unions maximize their investment goals and we offer an array of on- and off-balance sheet investment solutions, including certificates of deposit programs, overnight investments and marketable securities (such as treasuries, government agencies, mortgage-backed securities, etc). Currently, we offer two off-balance sheet CD programs that are great investment options for small credit unions in the current market. Our SimpliCD program allows credit unions to invest in bank CDs while receiving back office support, such as a monthly interest payment and statement regardless of how many certificates you own. We also offer investing in brokered CDs through our partnership with Multi-Bank Securities, LLC. Corporate One is also happy to provide investment training to your staff, managers and board members on these solutions to help your credit union optimize the return on your investment portfolio.

For more information on how Corporate One's investment solutions could benefit your credit union, please contact one of our licensed investment services representatives. They are ready and available to assist you and will do their best to find the best term and rate for your investments dollars while also protecting your credit union from being over-invested in bank issuers. As we are owned by our members, utilizing Corporate One’s investment services is a natural relationship that provides significant value from a trusted source.

Bob Post can be reached at bpost@corporateone.coop or 866/MyCorp1, ext. 9301.