The MACo OPEB Trust – an investment pool for counties and other governments with long-term retiree health care obligations – has already delivered on its promise to member counties. In less than three years of operation, the Trust has reported gains of more than $3 million from growth in assets, plus interest and dividends.
Under Maryland law, OPEB assets must be separated into a Trust in order to be invested with long-term strategies, including stocks and bonds. MACo developed the OPEB Trust as a ready-to-go option for counties, municipalities, community colleges, and libraries to use — allowing a member-guided investment strategy while sharing the various overhead costs of operating a guiding organization. The results have proven very beneficial for the ten Trust members — the investments have kept pace with market forces, while limiting investment risk, and have reached substantial gains unreachable without the Trust structure.
The following summary comments were assembled by the Trust’s investment advisors, GYL Financial Synergies:
• The MACo OPEB Trust was initially funded in April 2015 and charged with the task of providing participating entities with returns consistent with the target allocation while taking lower levels of risk.
• The Trust had a market value of $28.8 million as of August 31st, and returned 5.9% since the inception date of April, 2015. The custom benchmark returned 6.1% over the same time period.
• The target asset allocation is 65% equities, of which 38% is currently invested in index funds, and 35% fixed income
• Given the large relative cash flows since inception, Trust funds are being methodically invested (dollar-cost averaged) into the markets. Consequently, while the OPEB Trust has matched its custom benchmark since inception, it has done so while experiencing approximately 27% less volatility as measured by the Beta statistic.
• Over the past two years and five months, the Trust has appreciated by $3.2m through a combination of realized and unrealized gains plus interest and dividends.
• The Trust returned 2.1% for the past three months, with the custom benchmark returning 2.3%. For the year to date, the returns are 8.6% and 9.0% respectively.