Laserfiche WebLink
6.A. - Page 8 of 49 <br />REDWOOD CITY <br />Portfolio Recap <br />Our strategy for the fourth quarter encompassed the following: <br />For the Quarter Ended December 31, 2020 <br />Portfolio Review <br />Approaches carried forward from the third quarter: maintain allocations in most sectors, match benchmark's duration, and <br />carefully manage risk considering various headwinds caused by the uneven and decelerating recovery. <br />Yield spreads returned to near pre -pandemic levels in most sectors at the same time that new supply waned. This limited <br />new investment opportunities in the fourth quarter. <br />• After months of consistent supply and attractive value in the federal agency sector, limited new issuance towards year-end <br />slowed new purchases in the sector. However, meaningful additions in prior periods helped boost portfolio returns once <br />again in the fourth quarter. <br />• In the supranational sector, light seasonal issuance headlined a quiet close to the year. Excess returns were positive, adding <br />modest value in the portfolio. <br />• The taxable municipal sector remained abuzz as issuers continued to benefit from record -low borrowing rates. Although yield <br />spreads narrowed significantly since March, new debt issued during the fourth quarter remained an attractive alternative to <br />other government alternatives and even some high-quality corporate issuers. PFM continued to methodically increase <br />municipal allocations through participation in a number of new deals. <br />• Investment grade corporates outpaced the performance of most other sectors during the quarter. Corporates proved to be a <br />valuable asset class for both the quarter and for all of 2020, despite significant market disruptions early in the year. Investors' <br />strong demand for yield pushed spreads even tighter during the fourth quarter, which ended the year near 20 -year lows. <br />• Allocations of AAA -rated asset-backed securities (ABS) were decreased during the final months of 2020. The sector posted <br />strong absolute and relative returns for both the fourth quarter and the calendar year while providing diversification and <br />incremental income to the portfolio. The combination of quiet new issuance towards year end and robust demand limited <br />new opportunities in the sector. <br />PFM Asset Management LLC 16 <br />