City of Sarasota, Florida

Transcription

1 City of Sarasota, Florida Investment Performance Review Quarter Ended March 31, 2013 Financial Administration Department st Street Sarasota, FL (941) (941) fax John C. Lege III, CGFO, Finance Director Kelly R. Strickland, CPA, CGFO, Deputy Finance Director PFM Asset Management LLC 300 S. Orange Avenue, Suite 1170 Orlando, FL (407) (407) fax Steven Alexander, CTP, CGFO, Managing Director D. Scott Stitcher, CFA, Senior Managing Consultant Richard Pengelly, CFA, Senior Managing Consultant Gregg Manjerovic, CFA, Portfolio Manager Rebecca Geyer, CTP, Senior Analyst

2 City of Sarasota, Florida Investment Report - Quarter Ended March 31, 2013 Quarterly Investment Statistics as of March 31, 2013 Investments Market Value Quarterly Interest Income Fiscal Year to Date Income PFM Managed Investment/Short Term Portfolios $ 148,889,508 $ 316,129 $ 619,353 Fidelity Prime Institutional Money Market Fund 4,072,579 1,672 3,923 FMIvT 9,250,287 3,719 6,869 CD - Bank of America 3,000, Florida SBA Fund B 7, Wells Fargo Money Market Account 33,000,000 19,399 34,152 Services Fees n/a (63,503) (118,614) Subtotal $ 198,220,310 $ 277,417 $ 545,686 Change in Fair Market Value (81,590) (296,932) Change in Accrued Interest 20,114 47,307 Subtotal (61,476) (249,625) Total 215, ,061 Long Term Investments Quarterly Total Return Short Term Investments Net Book Value Rate of Return PFM Managed Investment Portfolio % Fidelity Prime Institutional Money Market Fund % Benchmark: Merrill Lynch 1-3 Year U.S. Treasury Index 0.1 Certificates of Deposit 0.20% Florida SBA Fund B n/a FMIvT 1-3 Year High Quality Bond Fund % Wells Fargo Money Market Account* 0.00% Benchmark: Merrill Lynch 1-3 Year U.S. Treasury/Agency Index Weighted Average Yield 0.11% FMIvT Intermediate High Quality Bond Fund % Benchmark: Benchmark: Barclays Capital High Quality Intermediate Aggregate % Merrill Lynch 3-Month U.S. Treasury Bill Index 3 Notes: 1. In order to comply with GASB accrual accounting reporting requirements; forward settling trades are included in the monthly balances. Performance on trade basis, gross (i.e., before fees), is in accordance with the CFA Institute's Global Investment Performance Standards (GIPS). Past performance is not indicative of future results. Excludes money market fund/cash in performance computation. 2. Bloomberg is the source of the 7-day yield at month end. 3. Bloomberg is the source of the yield at month end is the source of the FMIvT total return performance. * Wells Fargo Money Market Account pays an Earnings Credit Rate (ECR) on the available balance maintained at the bank and is used to cover the monthly bank service fees. 0.06% Quarterly Investment Report Page 1

3 City of Sarasota, Florida Investment Report - Quarter Ended March 31, 2013 Quarterly Investment Report Composition and Credit Quality Characteristics Security Type 1 March 31, 2013 % of Portfolio December 31, 2012 % of Portfolio Permitted by Policy U.S. Treasuries $65,584, % $70,180, % 100% Federal Agencies 42,392, % 42,504, % 100% Mortgage Backed 13,539, % 14,912, % 15% / 30% Corporate Notes 20,593, % 15,590, % 30% Commercial Paper 6,778, ,773, % Certificates of Deposit 3,000, % 3,000, % FMIvT 9,250, % 9,246, Florida SBA Fund B 7, % 7, % 20% Money Market Fund/Cash 37,072, % 35,999, % 20% / $30 Million Totals $198,220, % $200,214, % Money Market Fund/Cash 19% Florida SBA Fund B 0.004% FMIvT 5% Certificates of Deposit Commercial Paper 3% Corporate Notes 10% Investment Composition as of 03/31/13 Mortgage Backed 7% U.S. Treasuries 33% Federal Agency Obligations 21% Not Rated² 18% AAAm A-1+ (Shortterm) 3% A- 0.50% A 7% AAA 5% A+ Credit Quality Distribution² as of 03/31/13 AA+ 63% Notes: 1. End of quarter trade-date market values of portfolio holdings, including accrued interest. 2. The Certificate of Deposits, Florida SBA Fund B and Wells Fargo Money Market Account are not rated. Standard & Poor's is the source of the credit ratings, except for FMIvT Funds which are rated by Fitch. Quarterly Investment Report Page 2

4 City of Sarasota, Florida Asset Allocation Compliance as of March 31, 2013* Security Type 1, 6 Balance Percentage Notes Permitted by Policy Florida Prime (SBA) 7 7, % 3 25% United States Treasury Securities 65,401, % 5 100% United States Government Agency Securities 3,313, % 5 50% Federal Instrumentalities 38,858, % 5 75% Mortgage-Backed Securities 13,110, % 5 20% Interest Bearing Time Deposits/ Savings Account 3,000, % Repurchase Agreements % 25% Commercial Paper 6,778, % 2, 5 20% Corporate Notes 20,482, % 2, 5 20% Corporate Notes - FDIC % 50% State and/or Local Government Debt % 20% Money Market Mutual Funds 37,072, % 3 50% Intergovernmental Investment Pool 9,250, % 3, 4 75% United States Government Agency Securities 1.68% United States Treasury Securities 33.15% Florida Prime (SBA) 0.004% Asset Allocation as of March 31, 2013 Federal Instrumentalities 19.70% Mortgage-Backed Securities 6.65% Interest Bearing Time Deposits/ Savings Account 1.5 Commercial Paper 3.44% Intergovernmental Investment Pool 4.69% Corporate Notes 10.38% Money Market Mutual Funds 18.79% Individual Issuer Breakdown Balance Percentage Notes Permitted by Policy Individual Issuer Breakdown Balance Percentage Notes Permitted by Policy Government National Mortgage Association (GNMA) 3,313, % 5 25% Bank of America CD 3,000, % US Export-Import Bank (Ex-Im) % 25% Nordea North America Commercial Paper 4,998, % 5 5% Farmers Home Administration (FMHA) % 25% Toyota Commercial Paper 1,779, % 5 5% Federal Financing Bank % 25% JP Morgan Chase Corporate Notes 4,018, % 5 5% Federal Housing Administration (FHA) % 25% General Electric Corporate Notes 3,066, % 5 5% General Services Administration % 25% Bank of New York Mellon Corporate Notes 2,971, % 5 5% New Communities Act Debentures % 25% John Deere Corporate Notes 4,214, % 5 5% US Public Housing Notes & Bonds % 25% McDonald's Corporate Notes 1,400, % 5 5% US Dept. of Housing and Urban Development % 25% Walt Disney Corporate Notes 820, % Federal Farm Credit Bank (FFCB) 7,000, % 5 40% Anheuser-Busch Corporate Notes 2,009, % Federal Home Loan Bank (FHLB) 3,528, % 5 40% Pepsico Corporate Notes 1,000, % 5 5% Federal National Mortgage Association (FNMA) 22,258, % 5 40% Caterpillar Corporate Notes 979, % 5 5% Federal Home Loan Mortgage Corporation (FHLMC) 19,181, % FNMA Mortgage Backed Security 3,917, % 5 15% FHLMC Mortgage Backed Security 5,879, % 5 15% GNMA Mortgage Backed Security 3,313, % 5 15% Money Market Fund - Wells Fargo Bank 33,000, % 3 25% Money Market Fund - Bank of New York 4,072, % 3 25% Intergovernmental Investment Pool - Florida Municipal Investment Trust 9,250, % 3,4 25% Notes: 1. End of month trade-date market value of portfolio holdings, including accrued interest. 2. Combined total of Corporate Obligations and Commercial Paper shall not exceed 35% of the total investments. The combined total as of March 31, 2013 is Managed by the City. Balances provided by City per statement. 4. Includes balances from the 1-3 Year High Quality Bond Fund and Intermediate High Quality Bond Fund. 5. Managed by PFM Asset Management LLC. 6. A detailed list of each individual security may be obtained in the City's Financial Administration Department. 7. SBA's Fund B. * All Assets Quarterly Investment Report Page 3

5 City of Sarasota, Florida Investment Report Quarter Ended March 31, 2013 Summary In the first quarter of 2013, investors flocked to relatively riskier assets (such as corporate bonds and equities) as loose global monetary policy fueled a search for additional yield. The U.S. housing market continued to strengthen, and the unemployment rate fell to 7.6%. The domestic economy has continued to experience moderate growth, but some economists believe that the federal budget cuts that went into effect March 1 (also known as the sequestration) may lead to slower growth for the second half of the year. Economic Snapshot Housing starts have averaged more than 900,000 a year in the first quarter, up more than 25% over 2012 but still much lower than in the boom years. Home sales and housing prices are also significantly above recession levels. According to the U.S. Commerce Department, consumer spending rose 0.7% in February a fourth straight increase that was due in part to higher gas prices. Meanwhile, personal income grew by 1.1% in February after a big downturn in the prior month. Both numbers were slightly above expectations. U.S. gross domestic product (GDP) grew by 0.4% in the fourth quarter of 2012, while forecasts for first quarter growth are in the 3% range. Euro zone economies struggled with recession and political uncertainty. The banking crisis in Cyprus, Italy s difficulties creating a new government, and weakness in many European economies pushed the euro lower against the U.S. dollar and supported U.S. Treasury prices. Once again, heightened concerns about the euro zone caused a flight to quality late in the quarter. Interest Rates Interest rates rose modestly during the quarter across longer term maturities, while the flight to quality stemming from euro zone fears counteracted the move higher. The markets shrugged off the start of the federal budget sequestration as they did the fiscal cliff in December, but if the economy feels growing stress from budget cuts in the coming months, interest rates may be pushed toward recent lows. The Federal Reserve (Fed) remained committed to keeping shortterm rates at record low levels, pegging short term rates near zero. The Fed also continued to buy $45 billion in Treasuries each month in addition to its monthly purchases of $40 billion in Agency mortgage backed securities (MBS). Sector Performance High quality corporate bonds continued to perform well for the quarter, as spreads narrowed to post credit crisis lows. Security selection has been important, as certain corporate sectors (such as Financials) performed particularly well. After incurring losses in the fourth quarter of 2012 due to concerns that their tax exempt status might be curtailed, municipal bonds roared back to life in the first quarter of These securities, along with corporate bonds, were the top performers for the quarter. Supply scarcity and historically tight spreads resulted in Agencies contributing little or no additional performance when compared with similar maturity Treasuries. MBS recovered somewhat after their fourth quarter underperformance, bolstered by the upturn in housing values and expectations that the Fed s buying program would continue for the foreseeable future The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC (PFMAM) at the time of distribution and are subject to change. Information is obtained from sources generally believed to be reliable and available to the public; however, PFMAM cannot guarantee its accuracy, completeness, or suitability. This material is for general information purposes only and is not intended to provide specific advice or recommendation. The information contained in this report is not an offer to purchase or sell any securities. PFM Asset Management LLC Section A-1

6 City of Sarasota, Florida Investment Report Quarter Ended March 31, 2013 Economic Snapshot Labor Market Latest Dec 2012 Mar 2012 Unemployment Rate Mar'13 7.6% 7.8% 8. Change In Non-Farm Payrolls Mar'13 88, , ,000 Average Hourly Earnings (YoY) Mar'13 1.8% 2.1% 2.1% Personal Income (YoY) Feb'13 2.6% 7.1% 3. Initial Jobless Claims (week) Mar , , , % 10.0% 9.0% 8.0% 7.0% Unemployment Rate (left) vs. Change in Nonfarm Payrolls (right) Change In Non-Farm Payrolls Unemployment Rate 6.0% 3/31/10 9/30/10 3/31/11 9/30/11 3/31/12 9/30/12 600K 500K 400K 300K 200K 100K 0-100K -200K Growth Real GDP (QoQ SAAR) 2012Q4 0.4% 3.1% 2.0% GDP Personal Consumption (QoQ SAAR) 2012Q4 1.8% 1.6% 2.4% Retail Sales (YoY) Feb'13 4.6% 4.8% 6.3% % 4.0% 3.0% 2.0% Real GDP (QoQ) ISM Manufacturing Survey (month) Mar' Existing Home Sales (month) Feb' mil mil mil. 1.0% 0.0% 12/31/09 6/30/10 12/31/10 6/30/11 12/31/11 6/30/12 12/31/12 Inflation / Prices Personal Consumption Expenditures (YoY) Feb'13 1.3% 1.5% 2. Consumer Price Index (YoY) Feb'13 2.0% 1.7% 2.7% 5.0% 4.0% Consumer Price Index CPI (YoY) CPI Core (YoY) Consumer Price Index Core (YoY) Feb'13 1.7% 1.3% 2.8% 3.0% 2.0% Crude Oil Futures (WTI, per barrel) Mar 31 $97.23 $91.82 $ Gold Futures (oz) Mar 31 $1,595 $1,676 $1, % 0.0% 2/28/10 8/31/10 2/28/11 8/31/11 2/29/12 8/31/12 1. Data as of Third Quarter Data as of First Quarter 2012 Note: YoY = year over year, QoQ = quarter over quarter, SAAR = seasonally adjusted annual rate, WTI = West Texas Intermediate crude oil Source: Bloomberg PFM Asset Management LLC Section A-2

7 City of Sarasota, Florida Investment Report Quarter Ended March 31, 2013 Interest Rate Overview 2.5% U.S. Treasury Note Yields 4% U.S. Treasury Note Yield Curve 2.0% 3% Yield 1.5% 1.0% 0.5% 0.0% 3/31/12 6/30/12 9/30/12 12/31/12 3/31/13 2-Year 5-Year 10-Year Yield 1% 0% 3-yr 2-yr 1-yr 3-mo 5-yr 7-yr 10-yr Maturity March 29, 2013 December 31, 2012 March 31, yr Maturity 3/31/13 12/31/12 U.S. Treasury Yields Change over Quarter 3/31/12 Change over Year 3-month 0.07% 0.09% (0.0) 0.11% (0.04%) 1-year 0.13% 0.14% (0.01%) 0.2 (0.09%) 2-year 0.28% 0.27% 0.00% 0.35% (0.07%) Yield 5% 4% 3% 1% Yield Curves as of 3/31/ year 0.79% 0.74% 0.05% 1.07% (0.28%) 10-year 1.93% 1.81% % (0.35%) 30-year 3.10% 2.94% 0.16% 3.33% (0.23%) 0% 3-yr 2-yr 1-yr 3-mo 5-yr 7-yr 10-yr Maturity U.S. Treasury Federal Agency Industrial Corporates, A Rated 25-yr 30-yr Source: Bloomberg PFM Asset Management LLC Section A-4

8 City of Sarasota, Florida Investment Report Quarter Ended March 31, 2013 B of A Merrill Lynch Index Returns As of 3/31/2013 Returns for Periods ended 3/31/ Year Indices Duration Yield 3 Month 1 Year 3 Years U.S. Treasury % % 1.24% Federal Agency % 0.67% 1.37% U.S. Corporates, A-AAA rated % 0.44% 2.75% 2.93% Agency MBS (0 to 3 years) % 0.01% 1.19% 2.84% Municipals % 0.45% 1.05% 1.63% 1-5 Year Indices U.S. Treasury % 0.15% 1.26% 2.36% Federal Agency % 0.14% 1.19% 2.04% U.S. Corporates, A-AAA rated % 0.58% 4.05% 4.23% Agency MBS (0 to 5 years) % (0.03%) 1.88% 3.8 Municipals % 0.65% 1.68% 2.48% Master Indices U.S. Treasury % (0.26%) 3.23% 5.41% Federal Agency % 0.05% 2.51% 3.7 U.S. Corporates, A-AAA rated % (0.18%) 6.88% 7.45% Agency MBS (0.07%) 1.91% 4.17% Municipals % 6.56% Returns for periods greater than one year are annualized Source: Bloomberg PFM Asset Management LLC Section A-5