Agenda item

Purpose of Report

To provide the Executive with an update on the Council’s treasury management activity and the actual prudential indicators for the period 1 April 2018 to 30 September 2018.

Decision

That the Executive:

(1)       Notes the report.

(2)       Approves the change to the use of Low Volatility Net Asset Value Money   Market Funds.

Alternative Options Considered and Rejected

None.

Reason for Decision

The Council held £20.3 million of investments at 30 September 2018, the investment profile relating to which was attached to the report at Appendix A. Of this investment portfolio 100% was held in low risk specified investments, the requirement for the year being a minimum of 25% of the portfolio to be specified investments.

In terms of liquidity, the Council sought to maintain liquid short-term deposits of at least £5 million available with a week’s notice. The weighted average life of investments for the year was expected to be 165 days. At 30 September 2018 the Council held liquid short-term deposits of £11.3 million and the weighted average life of the investment portfolio was 61 days. The decrease in the weighted average life of the investment profile was due to a larger proportion of the portfolio being placed in shorter term investments.

With regard to security, the Council’s maximum security risk benchmark for the portfolio as at 30 September 2018 was 0.009% which equated to a potential loss of £0.001827 million on an investment portfolio of £20.3 million. This was slightly higher than the budgeted maximum risk of 0.008% in the Treasury Management Strategy which represented a very low risk investment portfolio. The Council invested in Money Market Funds which allowed easy access to funds for cashflow purposes whilst providing a small variable rate of interest. These had been Constant Net Asset Value funds, which meant that funds invested maintained a constant value. The Money Market Fund sector was in the final stages of converting these funds to Low Volatility Net Asset Value pricing which did not guarantee a constant net asset value, however, there were only low levels of volatility in these funds. It was recommended that this change did not present high levels of risk to the security of the Council’s funds and they would continue to represent a secure investment opportunity whilst allowing easy access to funds.

In respect of yield, the Council achieved an average return of 0.73% on its investment portfolio for the six months ended 30 September 2018 which compared favourably with the target 7 day average LIBID of 0.59% and was higher than the budgeted yield of 0.52% for 2018/19 in the Medium Term Financial Strategy.

As at 30 September 2018 the Council held £81,104,000 of external borrowing, of which 100% was fixed rate loans. For the six months ended 30 September 2018 the Council achieved an average rate of 3.90% on its external borrowing which was slightly lower than the budgeted rate set in the Medium Term Financial Strategy 2018-23.

Details relating to prudential indicators in terms of the Council’s capital expenditure plans, how these plans were financed, the impact of changes in these plans on the prudential indicators and the underlying need to borrow and compliance with the limits in place for borrowing were set out in paragraph 4 of the report.