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CURRENT INVESTMENT STRATEGY: The effective rate of return for the recent month on the portfolio increased slightly to 2.42% due to a mix of investment strategy. During the quarter ended March 31, 2020 the City started to experience the negative financial impacts resulting from COVID-19. The 5-year U.S. Treasury rates dropped to 0.38% as of March 31, 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 1,103 days as of March 31, 2020 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. In February 2020, Finance staff were authorized to deposit to and withdraw from the Conservative portfolio an additional amount up to the total annual required CaIPERS payment. In March 2020, an additional $5 Million was deposited to the Conservative portfolio. 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 March 31, 2020, the Conservative portfolio's balance was $11.9 Million, an increase of$4.7 Million, including the $5 Million March contribution, over the December 31, 2019 balance of$7.2 Million. The Conservative portfolio's investment return for the quarter ending March 31, 2020 was -2.92%. The Capital Growth portfolio's March 31, 2020 balance was $19.9 Million, a decrease of$3.8 Million from the December 31, 2019 balance of 23.7 Million. The Capital Growth portfolio's quarterly investment return was -15.87%.