Banking More Bucks

The city of Fayetteville expects to make an extra $500,000 this year simply by investing its money more prudently.

Fayetteville is apparently one of the first Arkansas cities to take advantage of a new law that allows municipalities to invest in corporate bonds and mortgage-backed securities, as long as the investments are bank-grade. Previously, state law restricted city investments to government treasuries.

The law, in essence, makes legal what the city of Little Rock had been doing for years.

Interest rates on those bank-grade investments is currently around 7.5 percent while 30-year treasuries are trading at about 6.25 percent — and that’s a huge difference when the investment is $35 million, as Fayetteville’s is.

Garner Asset Management Co. won the contract to manage the city’s money. Other finalists for the account were Arvest Asset Management and Stephens Inc.

Trent Trumbo, vice-mayor and a member of the committee that selected the portfolio manager, says he has the “highest regard” for Rebecca Garner, president, CEO and chief investment officer for the winning firm.

“For a company like Garner to manage money for some of the wealthiest families and most well known foundations and universities in the country means she’s doing an excellent job,” Trumbo says.

As for the additional investments, Trumbo says, “It doesn’t make sense that in the past we haven’t been able to buy bonds issued by Wal-Mart or Acxiom or other good Arkansas companies that have good financial conditions. … It only makes sense.”