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•Yields drifted modestly higher during the third quarter as early -quarter Brexit fears faded and U.S. economic data <br />rebounded, bringing the Fed closer to an eventual rate hike, perhaps in December. <br />•The primary strategy involved emphasizing allocations to credit instruments, including corporate notes and <br />commercial paper. Credit sectors provided incremental yield, a key contributor to return in a low rate environment. <br />•The corporate sector returned strong performance during the quarter, adding to its strong outperformance for the <br />year. <br />•Strong value can be found in 6-12 month commercial paper. Money market fund reforms that become effective in <br />October have caused a huge shift in assets from prime funds, which typically purchase short credit instruments, to <br />government-only funds. This caused spreads to widen sharply, creating excellent value in this sector. <br />•Yield spreads between Treasuries and agencies narrowed during the quarter and so U.S. Treasuries were purchased for <br />the portfolio. <br />2016 PFM Asset Management LLC <br />REDWOOD CITY, CA <br />For the Quarter Ended September 30, 2016 <br />Strategy Recap <br />Third Quarter 2016 –PFMAM’s Strategy Recap <br />7 <br />6. <br />1 <br />. <br />C <br />. <br /> <br />- <br /> <br />P <br />a <br />g <br />e <br /> <br />1 <br />2 <br />