Investment Advice

Investment Counterparty Advice
Unlike other advisors, Arlingclose provides its clients with investment advice, not just information transfer. Our clients benefit from proactive advice and a new, flexible approach to investment management. Our executives and clients are at the forefront of developing new opportunities and initiatives in investment activity. Treasury management investment guidance establishes a priority in relation to the investment approach of investors of public money. That priority is for security, followed by liquidity, followed by yield. As significant investors, our clients take comfort from Arlingclose's proven systems.

Given the events in autumn of 2008 it is interesting to note that Arlingclose proactively and consistently advised its clients in spring 2006 to remove Icelandic banks and their subsidiaries from their lending lists.

Our creditworthiness service provides added value rather than just a list of institutions meeting a pre-set credit rating criteria; we therefore use ratings alongside a whole range of other information and analysis to form our views and advice.

Our approach to credit is comprehensive and dynamic. It represents the here and now and and has never simply relied upon what we have long considered to be the flawed and blind reliance on following what the credit agencies say. We do not compromise on credit quality; our practical approach means that the application of workable and prudent credit criteria is not an onerous, complicated or time-consuming process.

We will advise on investment trends, developments and opportunities consistent with the Council's chosen strategy. It is the volatile nature of financial markets that provides opportunities for our clients to add value over their chosen benchmark provided that the benchmark is suitable and there exists sufficient flexibility in the investment strategy to respond to opportunities as they arise.

Debt Portfolio Advice

Our objective in advising on a debt strategy would be to fund the Council's borrowing requirements from the most appropriate source on the best available terms within an agreed framework, with an appropriate level of flexibility and control.

We are unique amongst Treasury Advisors in that we do not benefit directly or indirectly from fee/commission sharing or other incentives linked to our advice to clients on borrowing or investment activity and believe that the advantages of the flexible, transparent and approved facilities offered by the PWLB comfortably outweigh the vast majority of other loan routes offered by the money markets.

We receive daily updates from a carefully chosen selection of institutions on the rates offered on non-PWLB debt instruments and  have invested in the best available systems for financial market information that includes the swaps market that underpins non-PWLB borrowing.

We provide our clients with tailored borrowing and rescheduling advice.
Our advice on borrowing includes the type of loan, its maturity and the timing of the borrowing. We track the movements in the gilt market on a real time basis and accurately forecast PWLB rates on a daily basis enabling us to fine tune any borrowing strategy for the Council.

One of the key issues to consider in the appraisal of capital finance options is the confidence in the advice being provided. The appraisal must be undertaken in an objective, independent and structured framework. With many treasury advisers having clear conflicts of interest in the various alternative funding routes offered it seems increasingly important to ensure that treasury and capital finance options appraisal advice is provided from a truly independent source.

Training and Workshops

Arlingclose provides its clients with seminar programmes that are topical, timely and are driven by their needs.  The workshops, which are held both in London and on a rotating regional basis are an inclusive element of our treasury management service. The seminar programme is determined by our clients.

We limit the numbers of attendees to our workshop to around 15 people. This is because we want them to be true hands-on workshops. Where events prove popular we aim to provide them on more than one day as we prefer not to restrict participation.

An important by-product is that clients that attend our seminars are able to discuss issues closely and exchange contact details to maintain dialogue thereafter. Feedback from our clients on these events is important to us and has been excellent.  We host the following training and workshop events annually.

• Accounts Close-Down Forum (April)
• Basic Treasury Management (principles of the Gilt and money markets and how they relate to the PWLB, borrowing and fund management) (May)
• Treasury Management Practices Workshop (July)
• The Prudential Investment Portfolio (PIP) (September)
• Treasury Management Strategy Workshop (to also include Prudential Indicators) and link with our strategy documents that will be issued to clients (Dec/Jan)

Alternatively, Arlingclose would be pleased to structure on an annual basis a one-day training programme for treasury officers and/or Members at the Council, which will be specific and individual to the Council's requirements.

Member Training

The recent CIPFA Treasury Management Panel Bulletin (Treasury Management in Local Authorities – Post Icelandic Banks Collapse) and the Audit Commission Report (Risk and Return – English Local Authorities and the Icelandic Banks), released in March 2009, both emphasised the need for greater member involvement. Elected members should receive regular updates on the level of risks being undertaken in treasury management, and they should be equipped to effectively review and scrutinise treasury activities.

Arlingclose has and will continue to provide training for members on treasury management activities. We can attend Council meetings or provide workshops when it is convenient for Council Officers and Members. Training will be tailored to the required level and be specific to your organisation's needs and objectives.

Arlingclose and GriffithsMorley launch new training solution for local authorities

Arlingclose is delighted to announce the launch of a new and unique training service for elected members and officers.

The service is a joint venture with GriffithsMorley, the treasury partnership of Mike Griffiths and Peter Morley. Mike and Peter are nationally recognised experts, and well respected for their long and distinguished careers both in the City and at the forefront of treasury and investment management developments in local government and the wider public.   

CIPFA has recently announced a revised Code of Practice and cross-sectoral guidance notes for Treasury Management that will be published in the Autumn. It will become a requirement of the revised Code that training is provided for the relevant board/Council members with responsibility for treasury management. 

Arlingclose has developed this new and unique training service in direct response to demand from members and the forthcoming revisions to the Treasury Management Code.  The service has also been devised in response to the recent recommendations of the Communities and Local Government Select Committee and the Audit Commission.

The key objectives of the training service will be to provide members with the essential skills, techniques and knowledge they need to fulfil their treasury responsibilities in the most effective way. 

GriffithsMorley have been working closely with Arlingclose to devise a comprehensive and evolving training programme that reflects the critical periods for member treasury policy-setting and review.

The training programme will explore the key issues for members, including:

• The statutory and regulatory regime for local authority treasury and investment management
• Best practice, including the CIPFA Codes
• The respective responsibilities of members and officers
• The role of Audit/Scrutiny Committees
• The impact of the financial markets on local authority treasury and investment management
• Interpretation of management information and committee reports
• Selecting appropriate treasury and investment management objectives to meet local need
• Understanding treasury and investment management risks, and their effective control
• Measurement and monitoring of treasury and investment performance

This service is available to clients and non-clients alike and any enquiries should be directed to .

Technical Advice

Our interpretation of proposed legislative changes and draft government directives relating to treasury management and developments in local authority accounting matters are discussed with our clients and we advise them on the potential impact these changes would have on the General Fund and, where appropriate, the HRA.

Instead of generic or non-specific explanations, we enable our clients to understand the issues arising through working examples taken from the client's own balance sheets and accounts as we believe this gives the client a better insight and a practical response to technical or accounting issues.

Our regular technical bulletins on topical issues arising out of new legislation, directives, Accounting Standards and the Local Authority SORP, are written in a language that our clients understand.  Our practical local government finance experience including Capital Finance, local government reorganisation, grant commutation and experience as a pilot authority for the introduction of the Prudential framework greatly assist in this area.

The executives at Arlingclose have established strong links with Government departments, local authority associations and CIPFA, and we liaise with external auditors to get their informal views on accounting matters. Practical examples include our structuring of innovative capital financing arrangements in response to central Government grant supported projects, as well as initiating and leading the debate on the development of new investment guidelines.

In March 2006 CIPFA appointed Arlingclose to undertake the evaluation of the responses to the consultation exercise and to produce conclusions on the adoption of the accounting Standards.

Economic Overview

Economic research and data relating to the financial markets is now widely and quickly available.  It is no different to other information in the so-called 'information age'.

We draw on the forecasts and views of market making institutions. We build relationships and dialogue with those market participants that have to formulate a view and, crucially, then back that view through the investment of their clients' or proprietary funds.  We therefore use the quality research and input from market participants.  As established bond and gilt market makers, not only do they formulate an economic outlook based on economic fundamentals, they also gauge the daily/weekly 'pulse' of the fixed income markets.  We maintain close dialogue with investment houses and supplement it with data from a wide range of reputed sources such as the Bank of England's forecasts for the economy. 

We have invested in the best, most comprehensive and flexible information and trading systems, to keep us in touch with the markets on a real time basis. This enables us to independently monitor the markets that drive all aspects of your treasury strategy. It also enables us to forecast and communicate changes in PWLB rates on a real time basis. We regularly update interest rate forecasts to provide our clients with the latest changes to market conditions.

Go4 Options

The unique Arlingclose  Go4Options software, developed with Local Authorities, will help clients undertake objective, independent and detailed analysis to support a rigorous options appraisal process for asset acquisition, asset management and optimum financing decisions.

DECISION ANALYSIS

Go4Options quickly appraises the whole life costs associated with the funding of different capital assets from internal resources (investments) or by either borrowing fixed or variable rate loans from the PWLB (Annuity, Maturity, EIP), money market loans, or leasing on either an operating or finance basis.

Go4Options will appraise all competing financing options including PFI.

Go4Options will also calculate the optimum funding route on a net present value basis and will identify;

1. Revenue Budget implications
2. Lease evaluation including any lessor tax implications
3. Discounted cash flows
4. Sensitivity analysis – discount rates and movements in interest rates and asset utilisation and funding periods
5. Whole life costing analysis – extended and secondary term IRR analysis
6. Band “D” Council Tax implications
7. Balance Sheet analysis and Accounting entries
8. Compliance with IFRS and Lease Accounting standard IAS 17
9. Commentary on relevant qualitative factors to support decision analysis
10. Full detailed audit trail reporting

HOLISTIC APPROACH

• Go4Options supports the provision of  detailed advice regarding lease accounting under IFRS including IAS 17, IFRIC 12 and IFRIC 4. The requirement for classification of existing leases and classification of new leases including potential arrangements involving the use of infrastructure assets.
• Go4Options  calculates all the accounting entries, impact on the Balance Sheet, impact on the Treasury Management Strategy Statement, Prudential Indicators and MRP Statement.
• Go4Options reviews PFI, leasing and all other capital expenditure transactions.
• Arlingclose Go4Options Appraisal Software will help Local Authorities to make significant savings by always determining the most cost effective means of financing assets in the capital program.

Please contact or should you require further information.

Leasing Services

Following the recent CSR, increases in PWLB rates and the strategic review of financing reforms in local government there has been an increasing need for Local Authorities to consider and use leasing as part of the overall "prudential" mix of borrowing. However, with this need there are strategic and operational issues to consider to ensure leasing is fully compliant and represents a practical value for money financing solution before being considered for financing capital projects and short life assets. Arlingclose will assist you in making the right financing decisions and drive value from existing portfolios.

In the current economic climate Local Authorities now face unprecedented challenges in the drive to improve service quality whilst obtaining value for money. Determining optimum financing decisions has never been so critical and crucial within local authority budgets.

Asset management, stewardship and efficient use of assets can be supported by using Leasing where appropriate.

Arlingclose’s Leasing Advisory service avoids any conflicts of interest and is designed to provide transparent  and objective advice by constantly testing Leasing as an optimum financing solution.

There are always risks with using Leasing, particularly with potential end of lease charges where there is often a disconnect between the lease term and asset life. Arlingclose advice will help to minimize these risks and to ensure the whole life costs are measured to ensure leasing represents value for money versus all alternative financing options. 

Value for money decisions are guaranteed by using Arlingclose unique rigorous options appraisal models for evaluating leasing against the context of budget constraints and financial challenges that currently face Local Authorities.

Arlingclose's portfolio of leasing services can also assist Local Authorities in meeting targets with, not only demonstration of value for money, but also effective financial management and best practice. Arlingclose Leasing Advisory Services will assist with audit trail and lease accounting compliance.

Options Appraisal with Arlingclose will include the evaluation of the following competing asset financing methods:

• Finance Leasing
• Operating Leasing 
• PWLB Loans
• Contract Hire
• Rental Agreements
• Managed Service; Outsourcing contracts
• Cash, Capital receipts and revenue balances 
• PFI / PPP
• Bonds

Decision analysis; key factors will always include:

• NPV analysis and DCF scenarios / discount rate sensitivity 
• Whole life costs - IRR
• Asset depreciation
• Residual values
• Asset obsolescence risk; Technology refresh and upgrades
• Optimal asset useful working life and replacement strategies
• IFRS Accounting compliance

Once the appropriate method of financing has been selected and only if Leasing is a recommended solution Arlingclose will then  manage the leasing procurement process and the lease portfolio to include the following:

• preparing OJEU / ITT tender documentation if required
• evaluation of tender / bid responses including quantitative and qualitative factors
• management of the end of lease -  manage and reduce risk and additional charges
• advice with leasing documentation issues and asset return conditions
• advice on existing leases and lease portfolios  - terminations and novations
• early terminations
• asset management, asset sales; buyouts and assistance with any insurance issues.

Should you wish to discuss your circumstances or requirements further then please email , or contact Stephen Kelly, Greg Readings, Charles Humphry or Philip Clein.