TITLE
Recommendation to receive and file the Investment Report for Quarter Ending December 31, 2021. (Citywide)
DISCUSSION
The City of Long Beach (City) Treasurer's Office in the Financial Management Department invests the funds in compliance with the California Government Code, Section 53600 et. seq., and the City's Investment Policy. As of December 31, 2021, these funds had a book value of approximately $1.932 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, 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, 2021, can be found in the Investment Trading Activity (Attachment A).
Investment Strategies
The Investment Policy divides the City's investment portfolio into short-maturity, intermediate-maturity, and long-maturity portfolios. Their respective benchmarks are the Three-Month Treasury Bill Index, the ICE Bank of America Merrill Lynch (BAML) One-to-Three Year US Treasury/Agency, and the ICE Bank of America Merrill Lynch (BAML) One-to-Five Year US Treasury/Agency.
The short-maturity 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-maturity portfolio maintains a weighted average maturity of approximately one to three years and provides for the cash needs with maturities greater than six months. The long-maturity 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 $821.71 million of the total investment pool, or approximately 42.58 percent of the 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, 2021:
|
|
INVESTMENT VALUE As of December 31, 2021 |
|
INVESTMENT PERFORMANCE 4 As of December 31, 2021 |
|
Portfolio |
Book Value 1 |
Market Value 1 |
Unrealized Gain/(Loss) 2 |
|
Quarterly Portfolio Total Return3 |
Quarterly Benchmark Total Return |
|
Last 12 Months Portfolio Total Return5 |
|
Short- Maturity |
$446,765,713 |
$446,711,292 |
($54,420) |
|
0.03% |
0.01% |
|
0.24% |
|
Intermediate- Maturity |
$792,867,295 |
$788,302,350 |
($4,564,945) |
|
-0.42% |
-0.53% |
|
-0.49% |
|
Long- Maturity |
$469,503,755 |
$472,305,986 |
$2,802,230 |
|
-0.62% |
-0.68% |
|
-1.01% |
|
Total Investments |
$1,709,136,763 |
$1,707,319,628 |
($1,817,135) |
|
-0.36% |
-0.43% |
|
-0.50% |
|
|
|
|
|
|
|
|
|
|
|
Total Cash |
$222,542,186 |
$222,542,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash and Investments |
$1,931,678,949 |
$1,929,861,814 |
|
|
|
|
|
1) Book value is the initial value/outlay for an investment at the time of purchase (as much as five years ago) and still held in the portfolios, while market value represents the value at a point in time based on current market conditions.
2) Unrealized Gain/(Loss) is the difference between book and market value. It is inversely related to the change in interest rates. As interest rates rise or fall, the value of fixed-income assets moves in the opposite direction. Typically,
investments are held to maturity, and therefore, gains/losses are rarely realized.
3) Total return is a performance measurement metric that reflects the portfolio's overall value for this three-month period, if liquidated, including income and realized and unrealized gains and losses.
4) Investment Performance - Portfolio Total Return numbers are calculated as a weighted average.
5) Last 12 months Portfolio Total Return is a performance measurement metric that reflects a rolling 12-month return, which includes income and both realized and unrealized gains/(losses)
The quarter ending December 31, 2021 experienced rising market interest rates after a prolonged period of stable and historically low levels which caused the investment value to decline on a mark-to-market basis, resulting in an unrealized loss of $1.82 million from the prior quarter's unrealized gains of $8.14 million for securities purchased in the last five years and still held, with quarterly total return of -0.36 percent for the three months ended December 31, 2021, which was seven basis points (0.07 percent) better than the benchmark. Generally, there will be no actual realized loss since securities are typically held to maturity. Over the preceding 12 months, the investment portfolio generated an annualized total return of -0.50 percent.
Investment portfolio holdings as of December 31, 2021, are included in Attachment B.
This matter was reviewed by Deputy City Attorney Taylor M. Anderson and Revenue Management Officer Geraldine Alejo on February 17, 2022.
TIMING CONSIDERATIONS
City Council action on this item is not time critical.
FISCAL IMPACT
This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no fiscal or local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
KEVIN RIPER
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
THOMAS B. MODICA
CITY MANAGER