A New Look At The Investment Portfolio Reveals Loans Waiting To Happen

Credit unions still hold over $386 billion in investments and must seek out ways to maximize yield without sacrificing flexibility.


Credit unions are in business to serve their members and most CEOs would much rather make a loan to a member than buy another investment for their institution’s portfolio. However, the economic environment over the past several years has made that difficult. Even as loan growth is rebounding, credit unions still hold over $386 billion in investments, according to Callahan & Associates’ Peer-to-Peer Software.

The growth of investments has slowed from 12.3% in Dec. 2011 to 8.3% in Dec. 2012. While the majority of these investment dollars are invested in short-term securities, more than a quarter are held in longer-term investments with maturities over three years. As credit unions begin preparing for an even greater slowing in investments and — more importantly — a new surge in lending activity, some are once again viewing their portfolios as a liquidity pool for loans.

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Over A Quarter Of Investments Have A Maturity OF Three Years Or More

Generated by Callahan & Associates' Peer-to-Peer Software

Maintaining Your Liquidity Pool Without Sacrificing Yield

The challenge credit union investment managers are beginning to prepare for is keeping their investment portfolios available to fund new loans without sacrificing the yield they could gain by locking up money in investments with longer maturities.

One potential solution that allows credit unions to keep their eye on the prize of funding new loans is a short-duration mutual fund. Unlike overnight options, short-duration mutual fund portfolios can invest in a range of securities to help maximize current yield without sacrificing liquidity. Most funds in this category target overall durations between nine months and two years.

Shares in a mutual fund can typically be redeemed the same-day or next-day based on their current net asset value. This provides the flexibility credit unions need when loan demand is uncertain.  Institutional investors can quickly access their investment dollars as needed without having to decide which individual securities to sell.  When using mutual funds, CFOs and investment managers should ensure that the underlying securities are all permissible investments for credit unions and that they choose a partner who understands the industry.

As loan demand continues to increase, having an investment strategy that provides for accessibility and liquidity can help you focus on serving members’ financing needs and save you time when compared to actively managing your own portfolio of individual securities.

About TRUST, Mutual Funds For and By Credit Unions

Trust mutual funds options keep credit unions always invested, are professionally managed, and are based on the cooperative values of credit unions. The Ultra-Short Duration portfolio is one of three options available through TRUST. Callahan Financial Services, Inc., the distributor of TRUST, provides the resources and information credit unions need to support investment decisions. Contact us today to learn more or visit www.trustcu.com.

Mike Philbin is Vice President of National Sales for Callahan Financial Services, a subsidiary of Callahan & Associates that was founded to expand the investment alternatives available to credit unions. Mike is involved in both the marketing and sales functions for the Trust for Credit Unions.

The Trust for Credit Unions (TCU) is a family of institutional mutual funds offered exclusively to credit unions.  Callahan Financial Services is a wholly-owned subsidiary of Callahan & Associate and is the distributor of the TCU mutual funds.  Goldman Sachs & Co is the advisor of the TCU mutual funds. To obtain a prospectus which contains detailed fund information including investment policies, risk considerations, charges and expenses, call Callahan Financial Services, Inc. at 800-CFS-5678.  Please read the prospectus carefully before investing or sending money.  Units of the Trust portfolios are not endorsed by, insured by, obligations of, or otherwise supported by the U.S. Government, the NCUSIF, the NCUA or any other governmental agency.  An investment in the portfolios involves risk including possible loss of principal.


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