Presentation to the City of Los Angeles Investment Advisory Committee

Transcription

1 CHANDLER ASSET MANAGEMENT Presentation to the City of Los Angeles Investment Advisory Committee For the Month of March 2008

2 Economic Outlook 2

3 Impact on LA Bond yields were lower in March. The market s recent activity stems from concerns that difficulties in the housing and mortgage market have resulted in slower economic growth. The Non-Farm Payroll number showed a decrease of 80,000 jobs, and the unemployment rate rose to 5.1%. This was the third straight report that demonstrated negative job growth and increased fears that the economy has entered a recessionary period. The global market volatility has continued, and market participants remain extremely sensitive to signs of housing, mortgage and credit weakness. The Federal Reserve lowered the federal funds rate and the discount rate by 0.75% at their meeting on March 18th. The federal funds rate currently stands at 2.25%. The next scheduled FOMC meeting is on April 30th. The City s Reserve portfolio outperformed on a total return basis relative to its benchmark index for the month. The City s Reserve portfolio had a total return of 0.19%, which was significantly more than the benchmark index return of -0.06%. The positive relative performance for the Reserve portfolio was primarily the result of the strong performance in the portfolio s Corporate holdings. 3

4 Overview of Monthly Activities 4

5 Summary of Portfolio Characteristics Los Angeles Core March 31, 2008 Core Benchmark (3-Month Tbill) Los Angeles Reserve Reserve Benchmark (ML1-5 C/G) Los Angeles Consolidated Portfolio cost $ 2,160,348, $ 3,401,103, $ 5,652,120,716 Market value (with accrued) $ 2,168,756, $ 3,571,537, $ 5,830,962,492 % of Consolidated Market Value 37% -- 61% % Average Maturity (yrs) Modified duration Average Yield (Purchase) 2.90% % % Average Yield (Market) 2.82% 1.43% 2.75% 2.69% 2.73% Average credit quality AAA Treasury AAA AAA AAA 5

6 Consolidated MATURITY DISTRIBUTION 40% 35% 30% 25% 20% 15% 10% 5% 0% /31/2008 2/29/ /31/ % 0.0% 4.7% 17.9% 13.8% 13.5% 15.7% 0.0% 2/29/ % 0.0% 4.6% 19.8% 12.5% 12.3% 19.7% 0.0% 6

7 Consolidated SECTOR ALLOCATION March 31, 2008 February 29, 2008 Agency 19.6% Mortgages Pass Thru 3.1% Cash 1.6% Commercial Paper 25.1% Mortgages Pass Thru 3.4% Agency 15.4% Cash 4.8% Commercial Paper 23.1% US Corporate 21.4% US Treasury 29.2% US Corporate 20.8% US Treasury 32.5% 7

8 Portfolio Compliance with Policy & Guidelines Portfolio Compliance with Policy and Guidelines - March 31, 2008 Standard Compliance Government Securities Five Years Complies Banker s Acceptances 180 Days Complies none in portfolio Commercial Paper 270 Days Complies Negotiable Certificates of Deposits/Time Deposits 180 Days Complies none in portfolio CRA Certificates of Deposit One Year Complies none in portfolio Repurchase Agreements 32 Days Complies none in portfolio Reverse Repo/Securities Lending 92 Days Complies none in portfolio Corporate Notes Five Years Complies Mortgage and Asset Backed Securities / CMOs Five Years Complies 8

9 Portfolio Compliance with Policy & Guidelines Portfolio Compliance with Policy and Guidelines - March 31, 2008 Standard Compliance Government Securities 100% Complies State/Local Agency Securities 10% Complies none in portfolio Banker s Acceptances 30% Complies none in portfolio Commercial Paper 40% Complies Negotiable Certificates of Deposit/Time Deposits(+CRA) 30% Complies none in portfolio Repurchase Agreements 15% Complies none in portfolio Reverse Repo/Securities Lending 5% for Reverse Repo; 20% Reverse Repo+ Securities Lending Complies none in portfolio Diversified mutual funds 20%; no limit on money market funds Complies none in portfolio Corporate Notes 30% Complies Mortgage and Asset Backed Securities / CMOs 20% Combined Complies LAIF State Limit ($40 million per account) Complies 9

10 Portfolio Compliance with Policy & Guidelines Portfolio Compliance with Policy and Guidelines - March 31, 2008 Standard Compliance Federal Agency Securities 30% Complies Non-Governmental Issuer 5% Complies Single Transaction $200 million without Treasurer s written approval Complies Dealers from Approved List Complies Commercial Paper from Approved List Complies Corporate Notes from Approved List Complies 10

11 Portfolio Compliance with Policy & Guidelines Portfolio Compliance with Policy and Guidelines - March 31, 2008 Standard Core Compliance Maturity Limitation One Year Complies Modified Duration Less than/equal to 0.50 Complies 0.14 Reserve Modified Duration =ML 1-5 Year Government/A-rated Corporate Index (+/- 10%) Complies 2.40 vs (102.1%) 11

12 Core SECTOR ALLOCATION March 31, 2008 February 29, 2008 Agency 3.3% Commercial Paper 67.4% Agency 16.7% Commercial Paper 74.6% US Corporate 22.1% US Corporate 15.9% 12

13 Reserve SECTOR ALLOCATION March 31, 2008 February 29, 2008 Agency 21.9% Agency 22.3% US Corporate 25.3% Mortgages Pass Thru 5.1% US Corporate 21.8% Mortgages Pass Thru 5.3% US Treasury 47.7% US Treasury 50.6% 13

14 Portfolio Transactions Acquisitions March 2008 Desc Maturity Action Date Principal Interest Total UST Note 2/28/2013 Buy 3/3/ ,753, , ,758, UST Note 2/28/2013 Buy 3/3/2008 2,528, ,529, CATERPILLAR Note 12/7/2012 Buy 3/4/ ,365, , ,494, JOHN DEERE Note 10/17/2011 Buy 3/4/ ,117, , ,528, GENWORTH Note 6/15/2012 Buy 3/4/2008 7,640, , ,734, FFCB Note 2/7/2013 Buy 3/6/ ,007, , ,103, VERIZON Note 12/1/2010 Buy 3/17/ ,642, , ,148, GENERAL DYNAMICS Note 8/15/2010 Buy 3/18/2008 7,764, , ,795, FFCB Note 2/13/2012 Buy 3/25/ ,955, , ,031, BANK OF AMERICA Note 6/15/2012 Buy 3/25/2008 5,713, , ,811, CONOCO Note 5/25/2010 Buy 3/25/ ,549, , ,928, HP Note 7/1/2012 Buy 3/26/ ,877, , ,100, UNITED TECH Note 5/15/2012 Buy 3/27/2008 8,694, , ,876, JOHN DEERE Note 5/15/2010 Buy 3/28/2008 8,171, , ,389, INTERNATIONAL LEASE Note 2/1/2011 Buy 3/28/2008 7,323, , ,383, FIFTH THIRD Note 2/23/2010 Buy 3/31/2008 6,232, , ,260, Dispositions Desc Maturity Action Date Principal Interest Total FHLMC Note 7/15/2009 Sell 3/3/ ,023, , ,249, FNMA Note 5/15/2009 Sell 3/3/ ,440, , ,695, UST Note 2/29/2012 Sell 3/12/ ,135, , ,241, UST Note 3/31/2009 Sell 3/24/ ,305, , ,521, UST Note 2/28/2013 Sell 3/24/ ,159, , ,177, UST Note 3/31/2009 Sell 3/25/ ,288, , ,505,

15 Credit Quality CP and NCDs Portfolio Compliance with Policy and Guidelines - March 31, 2008 Commercial Paper Moody's S&P % of Credit Group Issuer Par Value Rating Outlook Rating Outlook Port. Abbey National Abbey National 268,623,000 P-1 Stable A % AIG Funding, Inc. AIG Funding, Inc. 11,298,000 P-1 Stable A % American General Finance American General Finance 134,890,000 P-1 Stable A % American Express Credit American Express Credit 157,449,000 P-1 Stable A-1 Stable 2.70% Chevron Texaco Chevron Texaco 140,000,000 P-1 Stable A-1+ Stable 2.40% JP Morgan JP Morgan 108,513,000 P-1 Stable A-1+ Stable 1.86% National Austrailia Funding National Austrailia Funding 216,128,000 P-1 Stable A % Nestle Capital Corp. Nestle Capital Corp. 50,000,000 P-1 NEG A % Prudential Funding Prudential Funding 242,563,000 P-1 POS A-1+ Stable 4.16% Rabobank USA Rabobank USA 25,000,000 P-1 A % Toyota Motor Credit Toyota Motor Credit 108,912,000 P-1 Stable A-1+ Stable 1.86% Total 1,463,376, % Negotiable CDs Moody's S&P % of Credit Group Issuer Par Value Rating Outlook Rating Outlook Port. Total 0.00% 15

16 Credit Quality Corporate Notes Portfolio Compliance with Policy and Guidelines - March 31, 2008 Corporate Notes Moody's S&P % of Credit Group Issuer Par Value Rating Outlook Rating Outlook Port. TOYOTA MOTOR CORP Toyota Motor Credit Corp 11,000,000 Aaa STABLE AAA STABLE 0.19% GENERAL ELECTRIC CO General Electric Capital Corp 226,180,000 Aaa STABLE AAA STABLE 3.98% BERKSHIRE HATHAWAY INC Berkshire Hathaway 22,750,000 Aaa STABLE AAA 0.41% WELLS FARGO & COMPANY Wells Fargo Company 57,930,000 Aa1 STABLE AA+ STABLE 1.02% WAL-MART STORES INC Wal-Mart Stores 74,000,000 Aa2 STABLE AA STABLE 1.34% WACHOVIA CORP Golden West Financial 10,000,000 Aa1 NEG AA NEG 0.18% WACHOVIA CORP World Savings Bank 11,150,000 Aa1 NEG AA NEG 0.20% US BANCORP US Bancorp 15,000,000 Aa2 STABLE AA STABLE 0.27% BANK OF AMERICA CORP Bank of America Corp 40,310,000 Aa1 AA STABLE 0.70% ALLSTATE CORP Allstate Corp. 37,000,000 Aa2 STABLE AA 0.65% PROCTER & GAMBLE CO Proctor & Gamble 10,000,000 Aa3 NEG AA- 0.18% MORGAN STANLEY Morgan Stanley 28,180,000 Aa3 NEG AA- NEG 0.49% ELI LILLY & CO Eli Lilly & Co 10,000,000 Aa3 STABLE AA STABLE 0.19% GOLDMAN SACHS GROUP INC Goldman Sachs Group Inc 41,635,000 Aa3 STABLE AA- NEG 0.75% FIFTH THIRD BANCORP Fifth Third Bank 6,180,000 Aa2 NEG AA- 0.11% CREDIT SUISSE GROUP-SPON ADR Credit Suisse 10,000,000 Aa1 STABLE AA- NEG 0.17% PEPSICO INC Pepsi Bottling Group 52,828,000 Aa2 STABLE A+ 0.93% PEPSICO INC Pepsico Inc. 20,000,000 Aa2 STABLE A+ STABLE 0.37% PITNEY BOWES INC Pitney Bowes Credit Corp 6,000,000 A1 STABLE A+ 0.11% NUCOR CORP Nucor Corp 11,625,000 A1 STABLE A+ STABLE 0.21% MARSHALL & ILSLEY CORP Marshall & Ilsley 8,250,000 Aa3 NEG A+ NEG 0.14% MERRILL LYNCH & CO INC Merrill Lynch & Co Inc 71,500,000 A1 NEG A+ NEG 1.24% LOWE'S COS INC Lowe's Companies Inc 10,000,000 A1 STABLE A+ STABLE 0.18% LEHMAN BROTHERS HOLDINGS INC Lehman Brothers Holdings 43,300,000 A1 STABLE A+ NEG 0.72% JPMORGAN CHASE & CO Bank One Corp 19,335,000 Aa3 STABLE A+ 0.35% INTL BUSINESS MACHINES CORP IBM Corp 11,554,000 A1 STABLE A+ STABLE 0.20% HONDA CORP American Honda Finance 25,000,000 Aa3 STABLE A+ POS 0.44% CISCO SYSTEMS INC Cisco Systems 10,530,000 A1 POS A+ STABLE 0.19% AMERICAN EXPRESS CO American Express Centurion Bk 8,000,000 Aa3 STABLE A+ STABLE 0.14% AMERICAN INTERNATIONAL GROUP American General Finance 14,500,000 P-1 Stable A % AMERICAN INTERNATIONAL GROUP International Lease Finance 7,445,000 A1 STABLE AA- NEG 0.13% ABBOTT LABORATORIES Abbott Laboratories 5,000,000 A1 NEG AA STABLE 0.09% UNITED TECHNOLOGIES CORP United Tech Corp 19,565,000 A2 STABLE A STABLE 0.37% TARGET CORP Target Corp 10,000,000 A2 STABLE A+ STABLE 0.18% AT&T INC SBC Communications 9,735,000 A2 STABLE A STABLE 0.18% AT&T INC Bellsouth Corp 10,000,000 A2 STABLE A 0.18% AT&T INC AT&T Corporation 10,140,000 A2 STABLE A 0.19% ORACLE CORP Oracle Corp 10,000,000 A2 STABLE A STABLE 0.18% HEWLETT-PACKARD CO Hewlett Packard Company 14,500,000 A2 STABLE A STABLE 0.28% HONEYWELL INTERNATIONAL INC Honeywell Intl 10,000,000 A2 STABLE A STABLE 0.18% GENWORTH FINANCIAL INC-CL A Genworth Finl 17,605,000 A2 STABLE A STABLE 0.31% GENERAL DYNAMICS CORP General Dynamics Corp 20,676,000 A2 STABLE A STABLE 0.36% EATON CORP Eaton Corporation 5,750,000 A2 NEG A NEG 0.10% DEERE & CO Deere & Co 7,500,000 A2 STABLE A STABLE 0.14% DEERE & CO John Deere Capital Corp 20,000,000 A2 STABLE A STABLE 0.37% CONOCOPHILLIPS ConocoPhillips 13,000,000 A1 STABLE A STABLE 0.26% CONOCOPHILLIPS Conoco Funding Co. 15,000,000 A1 STABLE A 0.29% CATERPILLAR INC Caterpillar Inc. 9,198,000 A2 STABLE A STABLE 0.18% CATERPILLAR INC Caterpillar Finance Serv Corp 11,000,000 A2 STABLE A STABLE 0.20% ANHEUSER-BUSCH COS INC. Anheuser-Busch Companies 10,250,000 A2 STABLE A STABLE 0.18% BB&T CORP BB&T Corp 7,925,000 A1 STABLE A STABLE 0.14% BOEING CO Boeing Capital Corp 10,000,000 A2 STABLE A+ STABLE 0.19% VERIZON COMMUNICATIONS INC Verizon Global Funding Corp 23,715,000 A3 STABLE A 0.45% Total 1,201,741, % 16

17 Portfolio Performance: Total Rate of Return TOTAL RATE OF RETURN March 31, 2008 Since Inception 4.0% 3.0% 2.0% 1.0% 0.0% Core Portfolio Three Month T-Bill Annualized Since Latest Inception 1 Month 3 Months 12 Months (4/30/2001) Core Portfolio 0.23% 1.10% 5.07% 3.20% Three Month T-Bill 0.23% 0.88% 4.62% 2.95% 17

18 Portfolio Performance: Total Rate of Return TOTAL RATE OF RETURN March 31, 2008 Since Inception 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Reserve Portfolio 1-5 Yr. Corp/Gov Index Annualized Since 1 Month Latest 3 Months 12 Months Inception (11/30/2001) Reserve Portfolio 0.19% 3.30% 9.74% 4.68% 1-5 Yr. Corp/Gov Index -0.06% 2.98% 9.03% 4.45% 18