Catalyst News

Basics Still Matter with Investment Portfolio Management

by Catalyst Corporate | Apr 01, 2019

The credit union industry has topped $1.4 trillion dollars in assets and manages more than $250 billion in investments. But that staggering portfolio is composed of thousands of investment decisions made by employees at hundreds of individual credit unions. Although regulated by the National Credit Union Administration, the credit union industry investment activity is both varied and voluminous.   

Despite those big numbers, basics still matter. So says Steven Houle, vice president of Advisory Services at Catalyst Strategic Solutions. Houle examined trends in credit union industry investment portfolio management when he spoke to more than 70 credit union participants at the Southwest CUNA Management School’s mid-year session late last month. Cornerstone Credit Union League holds the two-day SCMS mid-year session for credit union staffers to learn, develop, and enhance leadership potential and skills.

Houle pointed out that as interest rates adjust to the current economic environment, “credit unions can have higher reinvestment opportunities, but potentially more market rate volatility.”

To counter risks, Houle outlined four basic steps of sound portfolio management that include:

  • Setting the investment objectives
  • Establishing practices and procedures
  • Selecting the portfolio strategy
  • Measuring and evaluating performance

Following those basics will help credit unions achieve safety and soundness objectives, as well position earnings and financial returns.

Houle said credit union portfolio managers should establish earning assets with “sufficient yield and duration to support long term earnings.” He suggested: “Implement a long-term strategy, which evaluates various investment structures and sectors to determine which will outperform the others over a specified investment horizon.”

To underscore the discussion, Houle reviewed several case studies using different portfolio management strategies based on different balance sheet risk profiles and positions.

The advisors at Catalyst Strategic Solutions have the experience to go beyond the textbook examples to provide customized plans to support stable growth. As a wholly-owned subsidiary of Catalyst Corporate Federal Credit Union, Catalyst Strategic Solutions, LLC, combines 30 years of experience with a cooperative business model to provide balance sheet guidance to credit unions nationwide.

To find out more, email contactis@catalystcorp.org or call 800-301-6196.