Council gets look at Navajo investments

By Kathy Helms
Dine Bureau

WINDOW ROCK — Don’t sell the cow as long as she’s putting out a calf. That was the message Wednesday to the Navajo Nation Council regarding its investment portfolio.

It wasn’t anything that hasn’t been said recently during Budget and Finance Committee meetings, but it was the first time the full Council had an opportunity to be educated on the issue so delegates can take the information back to their chapters and answer questions from constituents.

And the “hang onto the cow” philosophy was consistent with the opinions of outside money managers from more than 15 different firms across the United States who made five-minute presentations to Council regarding their particular areas of expertise.

Controller Mark Grant told delegates that from Oct. 1, 2007, through last Friday the market had lost 40 percent of its value, so almost everyone invested in the market lost value in their portfolio. But, he added, “Although the market went down 40 percent, the Navajo Nation’s portfolio only declined 19 percent.

“What this tells us is that because of our investment strategy, the Navajo Nation’s portfolio is positioned so that it does not lose money dollar for dollar when the market goes down. This is good for the Nation. It is sort of a defensive posture that we have.

“On our master trust portfolio, from Oct. 1, 2007, through Oct. 14, the Navajo Nation market value has declined $216 million. The retirement portfolio has declined $73 million. We’d like to point out that the retirement portfolio has declined from 10/1/07 in an amount of 14 percent. The decline in the retirement portfolio was less than the decline in the master portfolio,” Grant said.

Consultant Marcia Beard of RV Kuhns & Associates Inc. reminded delegates that whenever there’s a market boom, there is also a corresponding bust, such as the “technology bubble” of 2003. Although the worst of the financial crisis lies in the U.S. housing market, she said, “The crisis, as it’s being called, is now a global affair. Markets tend to be, in simple terms, a balance of fear and greed.”

Grant explained through the use of charts that when the Nation began its investment program and moving money out of Treasury bills and into different securities such as stock and bond markets, it increased the risks of the portfolio. However, if the Nation had stayed solely in Treasury bills, it would have lost out on about $340 million as of Sept. 30.

“It just shows that if we want to be in a very safe investment, the sacrifice that we make is we don’t get a high yield. Our yield is lower if we’re in Treasury bills. If we want to increase our returns, then we need to go out into stocks and bonds, and that increases the risks of the portfolio.”

He said the Navajo Nation’s portfolio has gone down significantly in the last two weeks, but pointed out, “If we were to take all our money out of the market, we would be locking in the losses that we have right now and we don’t want to do that. We want to make sure that we stay in the stock market and the bond market and that we are fully invested, so that when the market comes back up, that our portfolio would come back up with it.

“The market does come back up, and it does go back down as well. But if we’re not invested in the market, we’re not going to be able to benefit from the upward movement of the market,” he said.

Budget and Finance Committee Chairman LoRenzo Bates said afterward that he hopes the work session gave Council a more in-depth understanding as to the complexity of managing the Nation’s money. “Mark, myself and the money managers all indicated, ‘be patient and hold the course.’”

Council had been expected to go into executive session to discuss a possible change in investment strategy but didn’t feel it was necessary at this point in time, Bates said. “But that doesn’t mean we’re going to sit back idly and stay the course.

“Even though the market has made its corrections, there is opportunity out there and we are going to pursue those opportunities. In pursuing those opportunities it requires the Nation to change its strategy, and that’s something that we’re going to pursue and bring back to Council. Some of that authority may lie just with B&F. If certain actions require Council action, then we will bring it to Council. To change the overall strategy of our investments is a major decision. Our strategy right now is to buy and hold,” he said.