HomeMy WebLinkAboutFin Investment Report 2011.10CfTY OFn. 1
Agenda Item No: 3 g
Meeting Date: November 21, 2011
SAN RAFAEL CITY COUNCIL AGENDA REPORT
Department: FINANCE
Prepared by: Van Bach
Accounting Supervisor
City Manager Approval)
SUBJECT: INVESTMENT REPORT FOR OCTOBER 2011
RECOMMENDATION: ACCEPT INVESTMENT REPORT FOR THE MONTH ENDING
OCTOBER 31, 2011, AS PRESENTED
BACKGROUND:
Pursuant to the State of California Government Code Section 53601, staff is required to provide the
governing body a report regarding the City's investment activities. Each month the Finance
Department prepares a report outlining the major investments for the preceding month. Included on
the report are the cost of each instrument, the interest rates (yield), maturity dates, and market value.
Separate schedules are prepared for both the City and Redevelopment Agency.
Beginning in January 2005, the City established a contract with MBIA to administer cash management
services to a portion of our portfolio. In February 2010, MBIA restructured its fixed-income asset
management subsidiary and changed their name to Cutwater Asset Management (Cutwater). Services
provided by Cutwater include updating our investment policy annually, cash flow administration, and
procurement of various instruments using Cutwater's market expertise (aligned with our needs). In
addition, Cutwater prepares a comprehensive monthly investment report that meets not only required
reporting information required by State law, but can be used as an asset management tool.
The October report contains information regarding the Cutwater managed operating funds, excluding
our West America checking account, which had a balance of $1,191,471 at month end. The Cutwater
reports provide a fair amount of detail. I am highlighting those pages that the community and Council
might find most useful and informative.
ANALYSIS:
I will summarize elements of the key pages contained as an attachment with this report.
❖ Page 2 — Review of fixed income securities market — The Federal Open Market Committee met
on November 2" and once again kept the fed funds target rate at a range of zero to 0.25
percent.
FOR CITY CLERK ONLY
File No.:
r
Council Meeting: t: 41,,:21 f
t� n
Disposition: 6 zAL
=
SANRAFAEL CITY COUNCIL AGENDA REPORT / Page: 2
❖ Page 6 — Recap of Securities Held — This page summarizes all of our operating funds. The
chart shows a majority of our investments are in U.S. instrumentalities. Most of the City's liquid
funds are held in the State of California LAIF pool, which is used as a daily account for
withdrawals and deposits. Unrealized gains or losses are recorded only at fiscal year end for
accounting purposes.
❖ Page 7 - Reflects Maturity Distribution - All our operating cash funds are held to mature in less
than one year (October 2012). One hundred percent of the total invested cash matures within
90 days (again, the LAIF pool accounting for most of these dollars).
❖ Individual security information is presented on the "Securities Held" (pages 8). Specific
information is presented to show interest coupon rates, cost and fair values, earned income and
projected net yields. Acquiring diversified instruments with varying maturity dates allows the
market values to stay close to historical cost.
❖ Purchases (nape 10), sales (page 11) and transactions (page 12) are presented on separate
pages. This includes LAIF deposits and withdrawals for operating funds. LAIF activity reflects
the need to move cash around as large receipts are deposited (monthly sales tax payments)
and expenses are incurred (weekly vendor payments and semi-monthly payroll).
Our LAIF balance for October ended with a balance of $26,272,933. Portfolio returns on LAIF dollars
should be about 0.38 percent for October 2011. The percentage of investments held one year or less
is one hundred percent at month end. By our own policy, this level of liquidity is adequate to cover our
cash flow projections in the coming months.
The City is well placed and diversified in the market for the coming months. By continuing our practice
of diversifying into various agencies with different maturity dates, the City's portfolio is strengthened
against both credit and market risk.
FISCAL IMPACT:
No financial impact occurs by adopting the report. The City continues to meet the priority principles of
investing - safety, liquidity and yield in this respective order. The portfolio remains conservatively
invested. Sufficient liquidity exists to meet daily operating and capital project requirements for the next
six months. Operating funds, as defined for this report, exclude cash held with fiscal agents for the
payment of bond principal and interest.
OPTIONS/ACTION REQUIRED:
The City Council should adopt the report as presented in order to satisfy current State Investment
Code requirements and City policy.
ATTACHMENTS
WAManagement Services- WorkFile\Finance- WorkFilelCouncil MateriakStaff Reports120111Citylcityinvrpt102011.doc
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3
TREASURER'S CERTIFICATION
I CERTIFY THAT ALL INVESTMENTS MADE ARE IN CONFORMANCE WITH THE CITY'S
APPROVED INVESTMENT POLICY AND STATE INVESTMENT REGULATIONS. THE CITY HAS
SUFFICIENT LIQUIDITY TO MEET ALL OF THE OBLIGATIONS REQUIRED DURING THE NEXT
SIX-MONTH PERIOD.
JANET PENDOLEY
INTERIM FINANCE DIRECTOR
CU-fVVATER XSSE-T MANAG EMENT
Cutwater Asset Management
1700 Broadway, Suite 2050
Denver, CO 80290
303 860 1100
Fax: 303 860 0016
raw
Reports for the period October 1, 2011 — October 31, 2011
Please contact Accounting by calling the number above or email camrer)ortsecutwater.com with questions concerning this report.
lelk11
Fixed Income Market Review
October 31, 2011
U.S. Real Gross Domestic Product
01/01/97 - 09/30/11
Treasury Yield Curves
KhaLit 2J 09/30/11 -10/31/11
3
L
........ .............
... .. .. ............ ..... .
Economic Indicators & Monetary Poliev — Based on the advance estimate
in real gross domestic product (GDP), the U.S. economy grew at a 2.5
percent annualized growth rate during the third quarter of 2011. This was
the fastest pace in a year and up from 1.3 percent in the prior quarter.
Consumer spending, which accounts for around 70 percent of the economy,
accelerated to a 2.4 percent pace in the third quarter from 0.7 percent in the
prior quarter. This helped real GDP climb to $13.35 trillion, topping the
pre -recession peak of $13,33 trillion reached in the final quarter of 2007.
(See Chart 1.)
The U.S. economy improved somewhat during the third quarter with faster
than expected growth for the period. The same was true for the
employment situation as U.S. employers added a net 103,000 jobs in
September compared to an expected increase of 60,000 for the month.
Payrolls for the prior month were also revised higher to show a net gain of
57,000 in August. Private U.S. payrolls increased by a net 137,000 in
September compared to an expected increase of 90,000. The
unemployment rate held at 9.1 percent in September. This report helped
reduce some concerns that the economy is heading back into recession, but
faster job growth is still needed to bring down the unemployment rate that
remains elevated.
At its latest meeting on November 2"d,
the Federal Open Market Committee
(FOMC) kept the federal funds target rate at a range of zero to 0.25 percent.
The FOMC acknowledged "that economic growth strengthened somewhat
in the third quarter, reflecting in part a reversal of the temporary factors that
had weighed on growth earlier in the year." The Federal Reserve "continues
to expect a moderate pace of economic growth over the coming quarters"
and maintained its pledge to keep the benchmark federal funds rate near
zero through at least mid -2013. The Fed plans to "continue its program to
extend the average maturity of its holdings of securities as announced in
September."
PO Yield Curve & Soreads — Treasury yields were mixed in October with a
slight decline in short -end of the yield curve and increase in the long -end.
At the end of October, three-month Treasury bills yielded -0.02 percent,
six-month Treasury bills yielded 0.04 percent, two-year Treasuries yielded
0,24 percent, five-year Treasuries yielded 0.96 percent, 10 -year Treasuries
yielded 2.11 percent, and 30 -year bonds yielded 3,13 percent. (See Chart 2.)
Charts reprinted from Bloomberg L.P. Cutwater Asset Management
Page 2
Additional Information
October 31, 2011
A current version of the investment adviser brochure, for Cutwater Investor Services Corp., in the form of the Firm's ADV Part 2A is available for your review.
Please contact our Client Service Desk at 1-800-395-5505 or mail your request to:
Cutwater Investor Services Corp.
Attention: Client Services
H 3 King Street
Armonk, NY 10504
A copy of the brochure will be sent to you either by mail or electronically at your option.
In addition, a copy of the most recent version of the Firm's complete Form ADV can be downloaded from the SEC website at www.adviserinfo.sec.gov/
Cutwater Asset Management
Page 3
Amortized Cost Basis Activitv Summary
Beginning Amortized Cost Value
Six
Additions
Month Trailing
Contributions
0 00
Interest Received
28,480.77
Accrued Interest Sold
0.00
Gain on Sales
0.00
Total Additions
0.02%
Deductions
0.11%
Withdrawals
1,784,000.00
Fees Paid
1,000.00
Accrued Interest Purchased
0,00
Loss on Sales
0.00
Total Deductions
1.16%
Accretion (Amortization) for the Period
435.38
Ending Amortized Cost Value
2,08334
Ending Fair Value
0.00
Unrealized Gain (Loss)
Total
Annualized Coinriarative Rates of Return
City of San Rafael - City Operating Funds
Activity and Performance Summary
for the period October 1, 2011- October 31, 2011
Twelve
Six
Month Trailing
Month Trailing
Fed Funds
0.12%
0.08%
Overnight Repo
0.06%
0.04%
3 Month T -Bill
0.07%
0.02%
6 Month'F-Bill
0.11%
0.05%
1 Year T -Note
0,21%
0.15%
2 YcarT-Notc
0.50%
0.35%
5 Year T -Note
1,56%
1.16%
City of San Rafael - City Operating Funds
Activity and Performance Summary
for the period October 1, 2011- October 31, 2011
(1,785,000.00)
94.89
27,272,864.29
27,274,432.61
1,568.32
Detail of Amortized Cost Basis Return
For the Month
29,029,288.63
Interest
Accretion
Realized
Total
2,500.00
Earned
(Amortization)
Gain (Loss)
Income
Current Holdings
Realized Gain (Loss) on Sales
0.00
000
Cash and Equivalents
2,969,58
0.00
0.00
2,969.58
U.S. Instrumentality
416.66
18.72
0.00
435.38
Corporate
2,08334
76.17
0.00
2,159.51
Total
5,469,58
94.89
0.00
5,564.47
28,480.77
Annualized Return Net of Fees
(1,785,000.00)
94.89
27,272,864.29
27,274,432.61
1,568.32
Aniovi7ed Cost Stuninary - Page 4
Cutwater Asset Management
Summary of Amortized Cost Basis Return for the Period
For the Month
Total Portfolio
Excl. Cash Eq,
0.07%
Interest Earned
5,469.58
2,500.00
0-04%
Accretion (Amortization)
94.89
94.89
0.01%
Realized Gain (Loss) on Sales
0.00
000
Total Income on Portfolio
5,564.47
2,594.89
0.04%
Average Daily Historical Cost
28,645,826.82
995,805.00
0,12%
Annualized Return
023%
3,07%
0.28%
Annualized Return Net of Fees
0.19%
1.89%
0.07%
Annualized Return Year to Date Net of Fees
0.59%
2,12%
Weighted Average Effective Maturity in Days
2
37
Aniovi7ed Cost Stuninary - Page 4
Cutwater Asset Management
City of San Rafael - City Operating Funds
Activity and Performance Summary
for the period October 1, 2411- October 31, 2011
Fair Value Basis Activitv, Summary
Detail of Fair Value Basis Return
Beginning Fair Value
29,033,069.84
Interest
Change in
Total
Earned
Fair Value
Income
Additions
Contributions
0.00
Current Holdings
Cash and Equivalents 2,969.58
0.00
2,969,58
Interest Received
28,480.77
U.S. Instrumentality 416.66
(338.00)
78.66
Accrued Interest Sold
0.00
Corporate 2,083,34
(1,780,00)
303.34
Total 5,469,58
(2,118.00)
3,351.58
'Total Additions
28,480.77
Deductions
Withdrawals
1,784,000.00
Fees Paid
1,000.00
Accrued Interest Purchased
0,00
Total Deductions
(1,785,000.00)
Change in Fair Value for the Period
(2,118.00)
Ending Fair Value
27,274,43161
Annualized Cominarative Rates of Return
Summary of Fair Value Basis
Return for the Period
Twelve
Six
Month Trailing
Month Trailing
For the Month
Total Portfolio
Excl. Cash Eq.
Fed Funds 0,12%
0.08%
0.07%
Interest Earned
5,469.58
2,500.00
Overnight Repo 0.06%
0.04%
0.04%
Change in Fair Value(2,118-00)(2,118.00)
Total Income on Portfolio
3,351,58
382.00
3 Month T -Bili 0,14%
0,08%
0.00%
Average Daily Historical Cost
28,645,826,82
995,805.00
6 Month .r -Bill 0.30%
018%
0.12%
Annualized Return
0J4%
0A5%
1 Year T -Note: 0.47%
0A6%
0.47%
Annualized Return Net of Fees
0,10%
(0.73%)
2 Ycar'f'-Nlolc L11%
1.94%
0.12%
Annualized Return Year to Date Net of Fees
040%
030%
5 Year T -Note 4.35%
1236%
024%
Weighted Average Effective Maturity in Days
2
37
Fair Value Summary - Page 5 Culwater Asset Management
City of San Rafael - City Operating Funds
Recap of Securities Held
October 31, 2011
Portfolio / Segment Diversification
Cash and Equivalents 96.3%
U.S. Instrumentality 1.8%
Corporate 1.8%
Total: 100,0%
Weighted
Average
Mai Let
Duration (Years)
(roo
0.16
0.04
0.00
Holdings Recap - Page 6 Curwaler Asset Management
Weighted
Weighted
tJnreahzed
Average
Average
%
Weighted
Historical
Amortized
Gain
Final
Effective
Portfoho/
Average
Cost
Cost
Fair Value
(Loss)
Maturity (Days)
Maturity (Days)
Segment
Yield *
Cash and Nurvalents 20,272,933.11
26,272,933.11
26,272,933.11
0.00
1
1
96.35
038
U S. Instrumentality 499,535,00
499,965.58
500,712.00
74642
58
58
1 83
1.04
Corporate 496,27000
499,96560
500,787.50
82190
15
15
1.82
5.20
TOTAL 27,268,738.11
27,272,86419
27,274,432.61
1,568.32
2
2
100.00
0.48
* Weighted Average Yield is calculated on "yield to worst" basis
Portfolio / Segment Diversification
Cash and Equivalents 96.3%
U.S. Instrumentality 1.8%
Corporate 1.8%
Total: 100,0%
Weighted
Average
Mai Let
Duration (Years)
(roo
0.16
0.04
0.00
Holdings Recap - Page 6 Curwaler Asset Management
O
U
v
'L
0
N
s
City of San Rafael - City Operating Funds
Maturity Distribution of Securities Held
October 31, 2011
Maturity
Historical Cost
Percent
Under 90 Days
27,268,738 11
100,00%
90 To 180 Days
0.00
0.00%
180 Days to 1 Year
0.00
0,00%
I To 2 Years
(00
0.00%
2 To 5 Years
0,00
0.00%
Over 5 Years
0.00
0.00%
27, 268,738.11
100.00%
Maturity Distribution
28M
24M
20M
16M y 'A
Bm
4M4:;„
OM
1
O
oo
Maturity Distribution - Page 7
Cuhvater Asset Management
City of San Rafael - City Operating Funds
Securities Held
October 31, 2011
U.S. Instrumentalitv
3133XVRS2 11/18/09 1.000 12/28/11
500,00000
Historical Cost/
Amortized
Fair Values
CUSIP/ Purchase Rate/
Maturity/ Par Value/
Accrued Interest
Cost/Accretion
Change
Description Date oupon
Call Date Shares
Purchased
(Amortization)
In Fair Value
Cash and F,auivalents
500,000.00
496,270.00
GE Capital
96.35 0,38
t,AIF 10/31/11 0 378V
26,272,933 11
26,272,933.11
26,272,933.11
26,272,933.11
0.00
0.00
0.00
0.00
TOTAL
26,272,933 11
26,272,933.11
26,272,933 11
26,272,933.11
76.17
(1,780.00)
0.00
0.00
0.00
U.S. Instrumentalitv
3133XVRS2 11/18/09 1.000 12/28/11
500,00000
499,535.00
FIIIB
%
0.00
TC7TAI .
500,000,00
499,535.00
Port
(Lass)
000
Corporate
Interest
Cost yield
36962GT38 09/19/07 5 000 11/15/11
500,000.00
496,270.00
GE Capital
96.35 0,38
0.00
TOTAL500,000.00
2,969.58
496,270.00
96.35
0.00
GRAND 'TOTAL 27,272,933.11
27,268,738.11
500,787 50
821.90
0.00
V variable rate, current rate shown, average rate tinCash & Equivalents
11,527.78
1.82 520
Unrealized
500,712 00
746.42
Total
%
Gain
Interest
interest
Accrued
Port
(Lass)
Received
Earned
Interest
Cost yield
000
28,480.77
2,96958
4,762.15
96.35 0,38
0.00
28,480.77
2,969.58
4,762.15
96.35
499,965.58
500,712 00
746.42
0.00
416.66
1,708.33
1.83 1.04
18.72
(338.00)
499,965 58
500,712.00
74642
0.00
416.66
1,708.33
1.83
18.72
(338.00)
499,965.60
500,787 50
821.90
0.00
2,083.34
11,527.78
1.82 520
76.17
(1,780.00)
499,965.60
500,787 50
821.90
0.00
2,083.34
11,527.78
1.82 1
76 17
(1,780.00)
1
27,272,864.29
27,274,432,61
1,568.32
28,480.77
5,469.58
17,998.26
100.00
94.89
(2,118,00)
Holdings - Page 8
Cu water Asset Management
City of San Rafael - City Operating Funds
Maturity
CIJSIP Type
Coupon
GASB 40 - Deposit and Investment Risk Disclosure
Date
LAIF
October 31, 2011
Cash and Fyuivalents
0.378
ISSUER TOTAL.
Call S&P Moody Par Value t
Historical
% Portfolio
Market
% Portfolio
Weighted Avg
Date Ratme Rating Rharee
cnet
FO¢tcnct
Valne
Mkt Vnhw
Mkt I)or(Yrs)
AAA Aaa 26,272,933.11
26,272,933.11
9635
26,272,933.11
9633
0.00
26,272,933.11
26,272,933.11
96,35
26,272,933.11
96.33
0.00
AA-* Aaa 500,000 00
499,535.00
1.83
500,712.00
1.84
0.16
500,000.00
499,535.00
1.83
500,712.00
1.84
016
AA+ Aa2 500,000.00
496,270.00
1 82
500,787.50
1.84
004
500,000.00
496,270.00
1.82
500,787.50
1.84
0.04
J
27,272,933.11
27,268,738.11
100.00
27,274,432.61
100.00
0.00
GASB 40 - Page 9
Cutwater Asset Management
Maturity
CIJSIP Type
Coupon
Date
LAIF
Cash and Fyuivalents
0.378
ISSUER TOTAL.
FHLB
3133XVRS2 ll.S instrumentality
1000
12/28/2011
ISSUER TOTAL
GE Capital
36962G7'38 Corporate
5 000
11/15/2011
' ISSUER TOTAL
GRAND TOTAI,
Highlighted totals are issuers representing, 5 00%
or more of the portfolio's
market value
GASB 40 - Page 9
Cutwater Asset Management
CUSIP/ Purchase Rate/
Description Date Coupon
Cash and Eaurvidents.
LAIF 10/14/2011 0.378V
LAIF 10/251MI 1 0378V
TOTAL
GRAND TOTAL
V = variable rate, opening rate shown, average rate for Cash & Equivalents
City of San Rafael - City Operating Funds
Securities Purchased
for the period October 1, 2011- October 31, 2011
Maturity/ Par Value/ Unit
Call Date Shares Cost
28,480.77 100.000
600,000.00 100,000
628,480,77
628,480.77
Purchases -Page to
Principal
Accrued
Cost
Interest Purchased Yield
28,480,77
0.00 038
600,000.00
0.00 0.38
628,480.77
0,00
628,480.77
0.00
Cutwater Asset Management
City of San Rafael - City Operating Funds
Securities Sold and Matured
Sale or
for the period October 1, 2011- October 31, 2011
Amortized Cost at Sale/
CUSIP/
Maturity
Rate/ Maturity/
Par Value/
Description
Date
Coupon Call Date
Shares
Cash and Eaurvalents
85,00000 85,000.00 100.00
85,00000
0.00
LAIF
10/13/11
0,378 V
400,00000
LAID'
10/17/11
0.378 V
85,1300.00
LAIT
10/28/11
0 378 V
1,900,000.00
TOTAL
2,385,000.00
GRAND TOTAL
2,385,000.00
V = variable rate, current
rate shown,
average rate for Cash & Cash
Equivalents
City of San Rafael - City Operating Funds
Securities Sold and Matured
Accrued
for the period October 1, 2011- October 31, 2011
Amortized Cost at Sale/
Fair Value at
Historical Sale or Maturity Maturity
Sale or Maturity
Cost Accr / (Amort) Price
Chi, In Fair Value
400,00000 400,00000 100,00
400,00000
0.00
0.00
85,00000 85,000.00 100.00
85,00000
0.00
0.00
1,900,000.00 1,900,000.00 10000
1,900,000m
0,00
0.00
2,385,000.00 2,385,000,00
2,385,000.00
0,00
0,00
2,385,000.00 2,385,000.00
2,385,000.00
0.00
0.00
Sales - Page I I
Realized
Accrued
Gain
Interest
Interest
(Loss)
Sold
Received
0.00
000
000
0.00
000
0.00
0,00
0,00
0.00
000 000
0.00 0.00
0.00
0.00
Interest
Earned Yield
0.00 0.38
0.00 0,38
000 0,38
000
0.00
CuirwaterAsset Management
Balance
400,000,00
428,490,77
400,000.00
485,000.00
(115,000.00)
1,785,000,00
1,785,000.00
Transactions - Page 12 Cutwater Asset Management
City of San Rafael - City Operating Funds
Transaction Report
for the period October 1, 2011 - October 31, 2011
Date CUSH,
rransaction
See Type
Description Maturity PAR Value/Shares Principal
Interest
Transaction Total
10/13/2011
Sold
CE
LAW
400,00000 400,00000
000
400,000.00
10/14/2011
Interest
CE
LAIF
27,629,452.34 0,00
28,48077
28,480.77
Bought
CE
LAIF
28,48077 28,48077
000
(28,480,77)
10/17/2011
Sold
CE
LAIF
85,000.00 85,00000
0,00
85,000,00
10/25/2011
Bought
CE
LAIF
600,000.00 600,000.00
000
(600,000,00)
10/28/2011
Sold
CE
LAIF
1,900,000.00 1,900,000.00
0.00
1,900,000.00
Portfolio Activity Total
Net Contributions
0.00
Net Withdrawals
1,784,000.00 Fees Charged 1,000.00
Fees Paid
1,000.00
Balance
400,000,00
428,490,77
400,000.00
485,000.00
(115,000.00)
1,785,000,00
1,785,000.00
Transactions - Page 12 Cutwater Asset Management
Trans Settle Description
No Activity tills period
City of San Rafael - City Operating Funds
Securities Bid and Offer
for the period October 1, 2011- October 31, 2011
Call Date Broker Par Value Discount Price YTM/YTC Competitive Bids
Securities Purchased Bid and Offer - Page 13
Cutwater Asset Management
City of San Rafael - City Operating Funds
Upcoming Cash Activity
for the next 45 days
Date Transaction CUSIP Description Coupon Maturity Next Par! Shares Principal Interest Transaction
T),t, Call Date Total
11/15/2011 Maturity 36962GT38 GE Capital 5.000 11/15/2011 500,00000 500,00000 12,500,00 512,500.00
Upcoming Cash Activity - Page 14 Critwatev Asset Management