TITLE
Recommendation to receive and file Investment Report for Quarter Ending September 30, 2006. (Citywide)
DISCUSSION
The Department of Financial Management, City Treasurer's Office, invests City funds in compliance with the California Government Code, Section 53600 et seq., and the City's Investment Policy. As of September 30, 2006, these funds had a market value of approximately $1.45 billion, with approximately $479 million, or 33 percent of funds, maturing within six months, ensuring that sufficient funds are available to meet the City's budgeted expenditure requirements during this time period.
Compliance
All investment transactions have been executed in conformance with the City's Investment Policy and the California Government Code. According to the California Government Code, the maturity term of all investments is limited to a maximum of five years unless the local agency legislative body gives prior approval to exceed this limitation. The City's Investment Policy currently requires that all funds invested in the City's investment pool not exceed an average weighted maturity of three years. In addition, the Investment Advisory Committee, composed of a representative from the City Manager's office, Assistant City Auditor, Chief Assistant City Attorney, Director of Financial Management, City Treasurer, City Controller, Budget Manager and the financial officers of the Harbor, Water and Community Development Departments, meets quarterly, or as needed, to review investment policies, strategies and performance.
Ratinq Section
As of the date of this report, the City's investment holdings carry the highest credit rating of AAA and the lowest volatility rating of S1 by Standard & Poor's.
Investment Performance
The City Treasurer's Office invests in a variety of fixed-income securities that vary in maturity from one day to five years (excluding the Health SAVRS loan) as authorized by the City's Investment Policy and the California Government Code. The City's adopted 2006 Investment Policy divides the City's investment portfolio into a short-term and a long-term portfolio whose benchmarks are the 3-Month Treasury Bill and the Merrill Lynch One-to-Three Year Treasury/ Agency Index, respectively. Both of these indices are market indices that change daily.
At September 30, 2006, the City's investment pool market yield was 4.15 percent compared to 4.03 percent at June 30, 2006. The following table summarizes Investment Pool market yield performance for the quarter ending September 30, 2006:
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Quarter End Values |
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Portfolio Funds |
Amount of Funds |
Benchmark Return |
Weighted Avg Maturity |
Month end Yield |
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Short-Term Investment Pool |
$ 387,950,000 |
4.88 percent |
285 days |
4.93 percent |
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Short-Term Investment Pool |
$1,039,883,000 |
4.83 percent |
1.55 years |
3.85 percent |
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Total Investment Pool |
$1,427,833,000 |
4.84 percent |
1.34 years |
4.15 percent |
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State of California L.A.I.F.* |
For comparative purposes only |
N/A |
152 days |
5.02 percent |
* Local Agency Investment Fund effective average for the period.
The following table summarizes the purchase yield of the new investments vs. the average Benchmark Yield in the short-term portfolio by month for the quarter ending September 30, 2006:
SHORT-TERM PORTFOLIO
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Benchmark vs. Purchase Yield Analysis |
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Month |
Amount of Funds Invested |
Benchmark Return* |
Purchase Yield** |
Over/(Under) Benchmark |
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July 2006 |
$ 35,198,000 |
5.06 percent |
5.66 |
0.60 percent |
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August 2006 |
$ 64,667,000 |
5.08 percent |
5.53 |
0.45 percent |
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September 2006 |
$ 19,924,000 |
4.93 percent |
5.26 |
0.33 percent |
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Total Invested Funds * |
$119,789,000 |
5.05 percent |
5.52 percent |
0.47 percent |
* 91-Day T-Bill and other returns listed are weighted averages for the period. Excludes overnight and short-term investments under 10 days. **Yields stated to maturity assume the securities are not called or sold prior to the maturity date.
The following table summarizes the purchase yield of the City's new investments vs. the weighted average Benchmark Yield in the long-term portfolio by month for the quarter ending September 30, 2006:
LONG-TERM PORTFOLIO
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Benchmark vs. Purchase Yield Analysis |
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Month |
Amount of Funds Invested |
Benchmark Return* |
Purchase Yield** |
Over/(Under) Benchmark |
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July 2006 |
$ 41,902,000 |
5.10 percent |
5.74 percent |
0.64 percent |
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August 2006 |
$ 29,393,000 |
5.00 percent |
5.56 percent |
0.56 percent |
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September 2006 |
$ 19,990,000 |
4.81 percent |
5.34 percent |
0.53 percent |
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Total Invested Funds * |
$ 91,285,000 |
5.00 percent |
5.59 percent |
0.59 percent |
* Merrill Lynch One-to-Three Year Treasury/Agency Index and other returns listed are weighted averages for the period.
**Yields stated to maturity assume the securities are not called or sold prior to the maturity date.
A complete listing of investment balances, portfolio distribution and performance values can be found in Attachment A.
The City's investment pool consists of all City funds except Subsidence, certain bond proceeds, and special assessment district proceeds. The non-pooled investments are invested separately in accordance with bond indenture provisions or other legal requirements.
Short-Term Investment Strateqy
The City has adopted an investment strategy for the short-term portfolio that maintains sufficient liquidity within a rolling 12-month period to continue to satisfy the City's cash needs.
Lonq-Term Investment Strateqy
The City will continue to weigh new instruments at the 18-month to 3D-month part of the yield curve in order to meet or exceed the benchmark yield and duration.
Treasury Bureau staff continues to monitor market conditions and market spreads daily in order to take advantage of opportunities to enhance earnings, while at the same time maintaining safety of principal and adequate liquidity.
Cash Manaqement Goals
The City's cash management goals are to maintain and preserve the safety of funds in custody and provide liquidity for anticipated expenditure needs.
This report was reviewed by Assistant City Attorney Heather A. Mahood, Budget Management Officer David Wodynski and the City's Investment Advisory Committee on October 30,2006.
TIMING CONSIDERATIONS
This item is not time critical.
FISCAL IMPACT
There is no fiscal impact associated with this action.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
MICHAEL A. KILLEBREW
DIRECTOR OF FINANCIAL MANAGEMENT
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APPROVED: |
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GERALD R. MILLER |
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CITY MANAGER |