The State of Washington’s Office of the State Treasurer manages investments on behalf of state and local government agencies.
The State of Washington, Office of the State Treasurer (OST), has approximately $8 billion in pooled investment funds. The portfolio is a US Fixed income portfolio structured to meet the working capital needs of the State and its participating municipal governments. The State engaged in securities lending with its previous custodian and is very familiar with the concept. However, the State found it challenging to navigate the ever-changing securities lending market environment. Through its previous custodial and lending arrangement, the State found that opportunities to generate income and increase liquidity through its previous securities lending program were not being fully realized. As a result, the State discontinued its securities lending program.
In 2011, looking for opportunities to optimize its assets and revitalize its lending program, the State Treasurer’s Office initiated a competitive bid for a new custodial bank and securities lending provider.
Citi presented the State with a highly personalized solution, plus ready access to market experts and intelligence. The State found Citi’s securities lending offering to be the most comprehensive, and best fit the unique needs of the OST. The State of Washington also found Citi’s boutique solution best combines white glove service with power and flexibility via Citi’s OpenLendSM, the bank’s proprietary, open architecture, securities lending platform.
Citi’s OpenLendSM web-based reporting platform provides the State with full transparency and offers the most detailed market information, making it easy to directly access specific loan collateral and investment data to monitor performance and manage risk.
Citi’s securities lending experts, working hand-in-hand with the OST, created a program that structured the Office’s own money market fund as an investment vehicle. Under the program, Citi loans its securities to primary dealers and invests the cash back with the Office, which runs an internally-managed 2A7-like investment pool for local governments in which it also is a member.
The Citi-managed program has enabled the State to find new opportunities to optimize their portfolios and obtain greater market transparency. These results are especially gratifying considering the weak environment for lending of US Government securities and money market conditions that provide limited opportunities for generating risk mitigated, yield curve-based collateral reinvestment returns.
Citi’s lending and investment team, which sit on opposite sides of the securities lending desk, are in constant contact with the Treasurer’s Office. Citi’s hands-on communication approach to optimizing Washington’s lendable assets gives the OST direct access to the entire Citi lending desk. This open communication, often several times each day, optimizes cash levels and maximizes lending and investing opportunities.
“We are particularly satisfied with the trading performance and high-touch services of its [Citi’s] securities lending professionals,” said Douglas Extine, Deputy Treasurer, State of Washington. “We also appreciate having direct access to Citi’s agency lending desk and are impressed by the quality of the economic updates and global market intelligence it provides to its clients.”