CC PACKET 06141994 - Laserfiche WebLink

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MEMORANDUM DATE: June 14, 1994 TO: Larry Hamer, Interim City Manager FROM: Roger Larson, Finance Director ITEM: PIPER INSTITUTIONAL GOVERNMENT FUND In the past few days, there has been several articles in the Star Tribune regarding Piper Capital Managements Institutional Government.Fund. Over 20 cities and counties have suffered large losses of capital due to the:rapid decline in the value of the fund. Investors have filed a class action lawsuit indicating Piper misled them in the volatility of the fund. Sales representatives selling the fund stated "the fund carries no more than 5% high risk derivatives." Recent analysis by the State Auditor documents the fund carried up to 50% derivatives. The City of St. Anthony had assets in this investment until November of 1993. The following is a recap of the city's investment: 1) June '91 purchased 82,364.34 shares at a cost of $10.32 ($850,000) 2) Sold November '93 at $12.02 a share ($1,229,895.33) 3) Capital Gain & Investment Earnings $ 379,895.33 After liquidation of the investment, the City entered into a managed portfolio agreement with Piper Capital Management. The annual results of the portfolio (6.73% in 1992 and 8.55% in 1993) were impressive and the basic instruments invested in included T-Bill; T-Notes; T-Bonds and occasional Commercial Paper. To date the managed portfolio has not performed to my expectations nor has it compared to the interest rates which Piper Capital Management quoted the City of St. Anthony. As of 6/6/94 profit from the concept was averaging 2%. Based on the performance of the managed portfolio and the $200 million dollar class action suit, I am recommending Termination of the Investment Management Agreement between the City of St. Anthony and Piper Capital Management. The overall concern I have is that a-settlement of a suit this large may impact.Piper Capital Management to the point of financial insolvency. In addition, I am concerned the stress and inter-political events of the suit may impede Pipers ability to act in the best interest of St. Anthony.