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<br /> <br />REPORT <br />To the Honorable Mayor and City Council <br />From the City Manager <br /> <br />November 28, 2016 <br />SUBJECT <br />Quarterly Investment Report for Period Ending September 30, 2016. <br /> <br />RECOMMENDATION <br />Approve, by motion, the City’s Quarterly Investment Report for the period ending <br />September 30, 2016 <br /> <br />BACKGROUND <br />In June 2016, the City Council adopted a new investment policy which requires staff to <br />provide a quarterly Investment report to Council. Additionally, the City hired an <br />investment manager, PFM Asset Management LLC (PFMAM), to manage the City’s <br />surplus funds pursuant to the newly adopted policy. The City’s primary investment <br />objectives continue to be safety, liquidity, and return on investment (yield), in that order. <br /> <br />The attached report represents all areas in which City invests funds, excluding trust <br />funds, and bond proceeds held with a trustee. <br /> <br />ANALYSIS <br />The attached investment report indicates that as of September 30, 2016, surplus funds <br />(excluding cash with fiscal agents) from all sources were invested producing an <br />earnings rate of 0.91%. The market value of the portfolio as of September 30 was <br />$201,152,839.09. This includes the funds held in the County Treasurer’s investment <br />pool and with the State Treasurer’s investment pool. All of these investments are in <br />compliance with the City’s investment policy. As of September 30, the City has sufficient <br />liquid resources available to meet expenditure requirements for the next six months. <br /> <br />The City’s portfolio portion that is managed by PFMAM has a market value of <br />$129,408,612, with yield at cost of 1.02%, and an average maturity of 1.97 years. The <br />market benchmark selected is the Bank of America Merrill Lynch 1-5 year U.S. Treasury <br />Index. As expected, the City portfolio is behind on the average maturity as we continue <br />to transition the portfolio to the new 1-5 year strategy. Beginning with the quarter ended <br />March 31, 2016, the portfolio’s total return performance will be compared to the <br />benchmark’s total return performance. At PFMAM’s recommendation, the stated date of <br />performance is being delayed so that PFMAM can prudently restructure the portfolio in <br />line with the newly adopted 1-5 year strategy. <br /> <br />PFMAM’s primary strategy this first quarter involved reinvestment of called securities <br />and active trading to diversify the portfolio with corporate notes and commercial paper. <br />6.1.C. - Page 1