TITLE
Recommendation to receive and file the Investment Report for Quarter Ending September 30, 2018. (Citywide)
DISCUSSION
The Financial Management Department, 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 September 30, 2018, these funds had a book value of approximately $1.64 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 September 30, 2018 can be found in Attachment A.
Investment Strategies
The City's Investment Policy divides the investment portfolio into short-maturity, intermediate-maturity, and long-maturity portfolios. Their respective benchmarks are the Three-Month Treasury Bill, the One-Year Constant Maturity Treasury (CMT) and the ICE BOA Merrill Lynch One-to-Five Year 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 year 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 $603.5 million of the total investment pool, or approximately 37.11 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 September 30, 2018:
INVESTMENT PORTFOLIO POSITION AND PERFORMANCE SUMMARY
INVESTMENT POSITION INVESTMENT PERFORMANCE 4
As Of September 30, 2018 July 1, 2018 Through September 30,2018
Portfolio Book Market Unrealized Portfolio Benchmark Variance from
Value 1 Value 1 Gain/(Loss) Total Return 3 Total Return" Benchmark 3
Short-Maturity $293.208.984 $292,472.066 ($736.919) 0.50% 0.49% 0.01%
Intermediate-Maturity $819.339,879 $814,347,890 ($4,991,989) 0.45% 0.37% 0.08%
Long-Maturity $443,169,777 $432,790,729 ($10,379,048) 0.14% 0.07% 0.07%
Total Investments $1,555,718,640 $1,539,610,685 ($16,107,955) 0.372% 0.308% 0.064% I Cash
$86,857,595 $86,857,595
Total Cash and Investments
$1,642,576,235 $1,626,468,280
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. It is directly related to the change in interest rates. As interest rates rise, the principal value of fixed income assets falls, causing the unrealized loss to increase, or vice versa. 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 - Portfolio Total Return numbers are calculated as a weighted average.
Investment portfolio holdings as of September 30, 2018, are included in Attachment B.
This matter was reviewed by Deputy City Attorney Linda T. Vu on October 17, 2018 and by Budget Analysis Officer Julissa Jose-Murray on October 23, 2018.
TIMING CONSIDERATIONS
City Council action on 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