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CURRENT INVESTMENT STRATEGY: The effective rate of return for the recent month on the portfolio decreased significantly to 1.41 percent due to a mix of investment strategy and bond market offerings. Starting 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 0.92 percent as of March 31, 2021. 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 bygrowth and inflation expectations. This strategy increased the average days to maturity (ADM) to 1,190 days as of March 31, 2021 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 percent to 7 percent. 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. 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 and June 2020, two additional $5 million contributions were deposited to the Conservative portfolio- for a total of$16.7 million deposited into the Conservative portfolio. Conservative PARS plan $20.00 $18.32 $17.48 $18.17 $18.00 $16.00 $14.00 $11.89 $12.00 'a $10.00 $8.00 $6.70 $6.94 $7.06 $6.00 $4.00 $2.00 $- 00 00 co 0o rn m a-, rn rn rn o 0 0 0 0 0 .� .-i �--� �-i c-I �--� .-1 �--� .-� �--� .-1 N N N N N N N Oo U _6C OA 4, U _6C L +-, U _0 < 0 p LL Q -, < 0 p LL Q Q 0 p LL