City’s investments react to fall of Bear Stearns

BY ROJE ADAIMY

A portion of the City of Sydney’s investments have recorded a decline in value of around 36 per cent during March, following a month of instability across the global financial market.
The Council’s Collateralised Debt Obligation (CDO) investments dropped by almost $3.9 million, with some losing almost half of their original value.
“The valuations on all securities were impacted in March by financial markets reacting to the near collapse of the American Investment Bank ‘Bear Stearns’ due to liquidity issues,” according to a report from the City’s Finance, Properties and Tenders Committee.
However, these losses won’t be realised unless the investments are sold – which is not on the cards, according to the Council.
‘While there has been a general decrease in the paper value of these investments, the underlying fundamentals and credit quality of these securities remain sound and the City’s strategy is to hold these investments until maturity which is between two and six years away,” a City of Sydney spokesperson said.
The City News reported on the City’s CDO investments last month, after the Cole Inquiry Report into local government investments revealed a substantial number of risky investments across councils in NSW.
The Department of Local Government has since adopted the recommendations from the Cole Report, which means the City will be prevented from investing in specific new funds, including CDOs.
City of Sydney maintains that their investments are continuing to return strong results despite continued volatility in global credit and equity markets.