Investment Portfolio Increases, Components Shift

Low interest rates have credit unions searching for new strategies for their money, resulting in significant shifts in the portfolio.


The low interest rate environment has brought about significant changes to credit unions’ investments. The portfolio is increasing, and credit unions are shifting not only where they are investing but also the duration of those investments in order to boost their rate of return.

Investment Portfolio Composition
Data as of December 31, 2011
Callahan & Associates' Investment Portfolio Composition
Source: Callahan & Associates' Peer-To-Peer Software.

Through the fourth quarter of 2011, credit unions’ investment portfolios reached a new high of $348.5 billion, up 12.6% over 2010 levels. Almost every segment of the portfolio has posted double-digit increases or decreases, indicating credit unions are re-aligning their investment strategies with broader balance sheet shifts. Government and agency securities remain the largest component of the investment portfolio and balances increased $27.9 billion, or 18.0% from the previous year. Investments at banks and savings and loans have become the second-largest component of the investment portfolio (aside from cash on deposit), surpassing investments in corporate credit unions. These investments are up 4.1% to $44.6 billion, while funds held at corporate credit unions (including cash deposited in corporate credit unions) are down 35.5% to $38.1 billion. All other investments, which include categories such as trading securities and held-to-maturity securities, declined 1.7%, the softest decline among any category.

Investment Portfolio Component Growth
Data as of December 31, 2011
Callahan & Associates' Investment Portfolio Component Growth
Source: Callahan & Associates' Peer-To-Peer Software.

More than half of the investment portfolio is now in holdings with maturities of more than one year.  In order to receive a higher rate of return on investments, credit unions now have 53.9% of their portfolio in investments with more than one year to maturity. This is up significantly from prior to the Great Recession. In 2006, credit unions only allocated 41.2% of their portfolio to these types of investments. Although credit unions are increasing their investment duration, investments with maturities greater than 10 years have not significantly changed. Only 1.8% of the portfolio is held here, compared with 1.2% in 2006. The extra couple of years might be worth the higher return, but credit unions are not willing to lock up their money for extreme lengths of time.

The low interest rate environment is expected to continue through 2014. As credit unions continue searching for the best return for their money, they will likely keep shifting their investments to find it.




April 16, 2012


  • Can credit union invest in individual stocks
    John Abram
  • Nothing wrong with updating industry investment statistics. That said, the article would have been much more useful if it framed the stats with a more robust discussion of the whys, and contemplated the trends in light of the recently finalized IRR regulations (i.e. how are increased levels of portfolio optionality affecting IRR exposure levels when rates head up?)
    Risk Manager