TITLE
Recommendation to receive and file the Investment Report for Quarter Ending December 31, 2016. (Citywide)
DISCUSSION
The Department of Financial Management, City Treasurer's Office, invests the City’s funds in compliance with the California Government Code, Section 53600 et. seq., and the City’s Investment Policy. As of December 31, 2016, these funds had a book value of approximately $1.514 billion.
Statutory Compliance
All investment transactions have been executed in conformance with the City's Investment Policy and the California Government Code. The Investment Advisory Committee, composed of the Assistant City Auditor, Deputy City Attorney, City Treasurer, City Controller, Budget Management Bureau staff, and designated representatives from the Harbor and Water Departments, meets quarterly, or as needed, to review investment policies, strategies and performance. All portfolio transactions as of December 31, 2016, can be found in Attachment A.
Investment Strategies
The City's Investment Policy divides the investment portfolio into short-term, intermediate-term, and long-term portfolios. Their respective benchmarks are the Three-Month Treasury Bill, the One-Year Constant Maturity Treasury (CMT) and the Merrill Lynch One-to-Five Year Treasury/Agency.
The short-term portfolio maintains a weighted average maturity of three to six months and provides sufficient liquidity to satisfy the City’s short-term cash needs. The intermediate-term portfolio maintains a weighted average maturity of approximately one year and provides for the cash needs with maturities greater than six months. The long-term portfolio maintains a weighted average maturity of one to five years to satisfy the City’s longer-term cash needs.
The City's cash management goals are to maintain and preserve the safety of funds in custody and provide adequate liquidity for anticipated expenditure needs. Approximately $470 million of the total investment pool, or approximately 31 percent of funds, will mature in the next six months, ensuring that sufficient funds are available to meet the City’s liquidity needs.
Investment Position and Performance
The following table summarizes the City's investment pool position and performance for the quarter ending December 31, 2016:
|
INVESTMENT PORTFOLIO POSITION AND PERFORMANCE SUMMARY |
|
|
INVESTMENT POSITION AS OF December 31, 2016 |
INVESTMENT PERFORMANCE 4 October 1, 2016 THRU December 31, 2016 |
|
Portfolio |
Book Value 1 |
Market Value 1 |
Unrealized Gain/(Loss) 2 |
Portfolio Total Return 3 |
Benchmark Total Return3 |
Variance from Benchmark 3 |
|
Short-Term |
$238,850,224 |
$238,317,394 |
($532,830) |
(0.02) percent |
0.09 percent |
(0.11) percent |
|
Intermediate-Term |
$677,056,595 |
$674,491,383 |
($2,565,212) |
(0.34) percent |
(0.11) percent |
(0.23) percent |
|
Long-Term |
$432,554,541 |
$429,480,208 |
($3,074,332) |
(1.05) percent |
(1.07) percent |
0.03 percent |
|
Total Investments |
$1,348,461,360 |
$1,342,288,985 |
($6,172,374) |
(0.51) percent |
(0.38) percent |
0.13 percent |
|
|
|
|
|
|
|
|
|
Cash |
$165,778,480 |
$165,778,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash and Investments |
$1,514,239,840 |
$1,508,067,465 |
|
|
|
|
1) Book value is the initial value/outlay for an investment, while market value represents the value based on current market conditions.
2) Unrealized Gain/(Loss) is the difference between book and market value. Typically, investments are held to maturity and, therefore, gains/losses are rarely realized.
3) Total Return is an annualized performance measurement metric that includes income and both realized and unrealized gains/ (losses).
4) Investment Performance - Total Investments Total Return numbers are calculated as a weighted average.
Investment portfolio holdings as of December 31, 2016, are included in Attachment B.
This matter was reviewed by Deputy City Attorney Amy R. Webber on February 9, 2017 and by Assistant Finance Director Lea Eriksen on February 13, 2017.
TIMING CONSIDERATIONS
This item is not time critical.
FISCAL IMPACT
There is no fiscal or local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER