06 - Laserfiche WebLink

CURRENT INVESTMENT STRATEGY: The effective rate of return for the recent month on the portfolio increased slightly to 2.38% due to a mix of investment strategy. Analysts predict moderate U.S. economic growth in 2020 with the Federal Reserve potentially cutting rates by another 25 basis points in early 2020. Staff continues to invest in longer-term securities to secure the interest rate and match maturities with future cash needs. While short-term yields are highly sensitive to the Federal monetary policy, longer- term yields are more influenced by growth and inflation expectations. This strategy increased the average days to maturity (ADM) to 946 days as of December 31 , 2019 to capitalize the rate cuts as widely expected. Additionally, staff is balancing the portfolio's credit exposure to pick up incremental yields while complying with the City's investment policy's mandate of safety, liquidity, and yield. Staff will continuously monitor this strategy during the next fiscal year. Section 115 Trust Fund In June 2018 the City council approved the investment of $28 Million of various reserves into a Section 115 Trust Fund to help smooth the pension liabilities which are expected to grow considerably due to the reduction in the CALPERS discount rate from 7.5% to 7%. The investment is made into two separate portfolios, the first one for $6.7 Million into a Conservative portfolio which is available to pay the annual unfunded liabilities if necessary. We anticipate this investment to remain in place for a minimum of three years before being used if required. As of December 31, 2019, this portfolio was fully funded with PARS the investment manager selected by the City. The second portfolio (Capital Growth) addresses the longer-term pension liabilities and is currently designed to have an initial investment of $21.3 Million. The focus of this portfolio is to earn a higher rate of return over the next ten years or so before we would need to draw upon it. As of December 31, 2019, the Conservative portfolio's balance was $7.2 Million and had a quarterly investment return of 1.80%. The Capital Growth portfolio's December 31, 2019 balance was $23.7 Million and had a quarterly investment return of 5.92%. SAFEKEEPING OF SECURITIES: The two portfolios are held in third party safekeeping for the benefit of the City of Pleasanton at US Bank where US Bank is the contractual agent for PARS trust investments that are managed by Highmark capital Management.