TALLAHASSEE, Fla. -
* Know the institution with which you place funds. At Southeast, we carefully analyze where we invest, and credit unions should, too. We strongly recommend that our members carefully examine all intermediaries with which they invest, regardless of their affiliation.
* Ensure that you have access to adequate liquidity. Credit unions must have well-thought-out liquidity plans at all times, but even more so in a volatile environment. When buying securities, it is important to look at the size of the issue. In the case of larger issues (those over $25 million), several broker-dealers will make up the selling group or will become knowledgeable about the deal later. So, if one firm can’t buy and inventory the security, another one probably can. But smaller issues generally are less liquid and involve only one broker-dealer.
* Look to your corporate first for your investment needs. Frankly, for the highest return commensurate with safety and soundness, the best place for credit unions to place their surplus funds in a volatile market environment is with their corporate credit union.
Corporates take a very risk-averse stance, while also working to provide a fair market return. Over the past 30-plus years, corporates have become experts at navigating turbulent markets and have considerable funds-management experience.
* As with any institution, perform du- diligence with your corporate.
Credit unions can analyze their corporates more thoroughly than they can brokerage firms, banks or ANY other types of institutions–and we encourage them to do so. In fact, corporates are perhaps the mostly highly examined of all depository institutions. And in addition to member/owner reviews, and state and federal examinations, many corporates are analyzed by ratings agencies, bond carriers and, periodically, other regulators, such as the OCC or Treasury Department.
