Loading...
HomeMy WebLinkAbout06-23-2015 C5 BaraschCity of San Luis Obispo Portfolio Review Investment Oversight Committee Carlos Oblites, Director PFM Asset Management LLC 50 California Street, Suite 2300 San Francisco, CA 94111 415 - 982 -5544 May 14, 2015 CT) CD rv3 C N � O Cn CD co m m 0 © PFM Asset Management LLC Average Maturity (yrs.) Effective Duration* Average Purchase Yield Average Market Yield Average Quality Total Market Value City of San Luis Obispo - Consolidated Portfolio Characteristics Portfolio Portfolio 1.00 0.91 0.98 0.89 0.68% 0.72% 0.40 % 0.46% AA+ /Aaa AA+ /Aaa 100,067,923 92,913,060 'Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price, for each 1 % change in interest rates. Modified duration is a similar risk measure, but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callable notes, MBS, or ABS. Effective duration takes into account the impact that changing interest rates has on cash flows (i.e. if interest rates fall and a callable bond is more likely to be called prior to its final maturity, the effective duration will decrease). _— .�:- r�.�:._�e ��; .._._,.rte . x- :.s -_ .,.._...s ..�. :., _ k .�__ _ ,.- �=.ra_ �T :�€:� _Y..� �:.. ..s_.:�- ..- ...�....�. _u�:t .. ��t. . � _.._�:as.. + �be��= 4. r�f .��.f�.t•�cla�i- �S,r,�:4E_r. t i -:�.s- .a;.�.r.�..�€ © PFM Asset Management LLC 18 Month Average Average Monthly Balance 71,548,864 Historical Factor 100.00% January 71,970,385 100.59% February 72,828,217 101.79% March 74,428,657 104.02% April 77,846,068 108.80% May 77, 098, 912 107.76% June 75,762,304 105.89% July 63,945,565 89.37% August 66,876,998 93.47% September 67,043,774 93.70% October 71, 959,118 100.57% November 70,010,625 97.85% December 68,815,743 96.18% $100 $90 $80 $70 N $60 c $50 $40 $30 $20 $10 $0 -ME Dec -11 San Luis Obispo Total Portfolio Balance December 2011 —June 2014 1CCI CY &Lc Jun -12 Dec -12 Jun -13 Dec -13 JunA4 © PFM Asset Management LLC 14 • If the City experiences zero growth over the next two years, the core portfolio will decrease to $66.0 million. • The liquid portion of the City's funds will fluctuate between $13.1 and $24.0 million. Historical Balances and Projected Balances with Zero Growth December 31, 2011 — July 31, 2016 $100 — $90 ----- ------------------- - -- Historical " $80 - - - -- -- - -- __ - Liquidity $70 $60 –_° $50 $30 1 t ri $20 $10 $0 Dec `11 Dec -12 Note: Assumes a 15% cushion for additional liquidity. Dec -13 12/31/14 Balance: 93.628.615 12/31/14 Portfolio: 46,009,620 Dec -14 Projected Core Dec -15 Projected Liquidity e © PFM Asset Management LLC 17 B Yield — Percentage rate that expresses annualized rate of return at a point in time. — Forward- looking number. — Assumes no changes in cash flow, and reinvestment at the same rate. • Total Return — Percentage rate that expresses annualized rate of return over a specified period. -- Backward - looking number. — Takes into account all changes in the portfolio, including market value changes, reinvestment rates, and all cash flows. PFM Asset Management LLC 20 6% 5% 4% 3% 2% 1% 2 -Year U.S. Treasury Note Yield;History 2005 -2014 0% •rr --�- - --- Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Merrill Lynch Treasury Index Annual Returns 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 10 -Year Return 1 -3 Year 1.67% 3.96% 7.32% 6.61% 0.78% 2.35% 1.55% 0.43% 0.36% 0.62% 2.54% 0 -5 Year 1.79% 4.07% 7.41% 7.21% 0.30% 3.03% 2.69% 0.75% -0.11% 1.00% 2.77% 1 -5 Year 1.39% 3.81% 8.16% 8.73% 0.23% 3.61% 3.36% 0.91% -0.19% 1.24% 3.08% Sources: Bloomberg, Bank of America Merrill Lynch © PFM Asset Management LLC 21 Sources: Bloomberg, Bank of America Merrill Lynch © PFM Asset Management LLC 22 `V Risk/Return of Various Benchmarks 10 Years Ended December 31, 2014 Merrill Lynch Duration Annualized Total Cumulative Value Quarters With Treasury Index (years) Return of $50 Million Negative Return 1 Year 1.00 2.00% $60,969,081 4 out of 40 1 -3 Year 1.89 2.54% $64,234,764 6 out of 40 0 -5 Year 2.23 2.77% $65,720,025 9 out of 40 1 -5 Year 2.69 3.08% $67,736,348 11 out of 40 3 -5 Year 3.84 3.96% $73,747,054 13 out of 40 Sources: Bloomberg, Bank of America Merrill Lynch © PFM Asset Management LLC 22 60% 53% 50% - --- _ - - -- - - 40% 30% ________ 31 % 24% 24% 20% - - 10% - - - - - - -- 6% 3% 0% 11 0 Less than 1 Year 1 to 2 Years Sources: Bloomberg, Bank of America Merrill Lynch As of December 31, 2014 W VFM Asset Management LLC Ccl PFM Asset Management LLC -- ---- _ 01 -3 Year U.S. Treasury ■ 0 -5 Year U.S. Treasury 41% ■ 1 -5 Year U.S. Treasury - — -- - - -- — ____— - - ------------------------ - - - - -- ------ -- --------- 25% a20% 21% 2 -3 Years 0 3-4 Years 0% 4 -5 Years 23 Market Value Loss on $50 Million Portfolio Due to Instantaneous Change in Interest Rates Index Portfolio Duration Interest Rates (years) Rise 0.25% City of San Luis Obispo 1.78 1 -3 Year Treasury Index 1.89 0 -5 Year Treasury Index 2.23 1 -5 Year Treasury ; 2.69 Durations as of December 31, 2014 $222,500 $236,250 $278,750 $336,250 Interest Rates Rise 0.50% $445,000 $472,500 $557,500 $672,500 © PFM Asset Management LLC 24 • While longer -term portfolios have historically provided higher returns, they have greater volatility from quarter to quarter. 20% 15% 10% r.. �a 0 5% m N 7 = 0% Q -5% -10% Annualized Quarterly Returns 10 Years Ended December 31, 2014 Treasury Past 10 -Year Index Annualized Total Return 1 -3 Year 2.54% g° 1 -5 Year 3.08% — 0 -5 Year 2.77% V 1w Source: Bloomberg ©PFM Asset Management LLC 25 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Average Maturity (yrs.) Effective Duration* Average Purchase Yield Average Market Yield Average Quality Total Market Value City of San Luis Obispo - Consolidated Portfolio Characteristics Portfolio Portfolio 1.00 0.91 0.98 0.89 0.68% 0.72% 0.40% �c`'� .��```°''� 0.46% AA+ /Aaa AA+ /Aaa 100,067,923 92,913,060 "Effective duration used in place of modified duration. Effective duration is the approximate percentage change in price, for each 1 % change in interest rates. Modified duration is a similar risk measure, but it ignores how changes in rates will impact cash flows on bonds with embedded options such as callable notes, MBS, orABS. Effective duration takes into account the impact that changing interest rates has on cash flows (i.e. if interest rates fall and a callable bond is more likely to be called prior to its final maturity, the effective duration will decrease). © PFM Asset Management LLC 18