INVESTMENT
PORTFOLIO
REPORT FOR
MARCH 31, 2022
CITY COUNCIL
June 21, 2022
CITY TREASURER’S
OFFICE
• Portfolio Overview
• Economic Conditions
• Outlook and Strategy
CITY TREASURER’S
OFFICE
PORTFOLIO
OVERVIEW
CITY TREASURER’S
OFFICE
$360
$380
$400
$420
$440
$460
$480
$500
City Investment Pool Combined Successor Agency and Housing Authority Historical Market Value
$504 M
$1 M
(in millions)
$43 M
CALPERS
payment
$42 M
CALPERS
payment
Negotiable Certificates of Deposit, $17M
3%
LAIF, $132M
42%
Corporates - Medium Term Notes, $133M
26%
Municipal Bonds, $44M
9%
Supranational Obligations, $17M
4%
US Agency, $148M
29%
US Treasury Notes, $14M
3%
Portfolio Market Value by Asset Class
Portfolio Market Value
$ 504 M
Compliance – Portfolio Allocation
ASSET CLASS MARKET
VALUE PORTFOLIO % LEGAL MAXIMUM POLICY LIMITS COMPLIANCE Negotiable CDs $17 M 3% 30% 0 to 30%
LAIF $132 M 42% $75 M per
account
$75 M per
account
Corporates –
Medium Term Notes $133 M 26% 30% 0 to 30%
Municipal Bonds $44 M 9% No limit 0 to 30%
Supranational
Obligations $17 M 4% 30% 0 to 15%
US Agency $148 M 29% No limit 0 to 90%
US Treasury $14 M 3% No limit 0 to 100%
$58
$46 $43
$64
$161
$132
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
0-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years
Maturity Range
LAIF
City
Investment
Pool
(in millions)
Portfolio Duration
~ 2.26 years (with LAIF)
~ 3.07 years (without LAIF)
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
Portfolio Yield 2-Year Treasury 12-Month Rolling Average LAIF Average Monthly Yield Yield
0.37%
0.65%
1.51%
Our portfolio’s strategic allocation has
allowed us to take advantage of rising
yields and at the same time, weather
the market volatility in recent years. April 2022
yield at 1.66%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
Interest Income 2-Year Treasury 12-Month Rolling Average Income Summary
$651K
in March 2022
Interest Income
Treasury Rate
ESG Investments Spotlight
California Health Facilities Financing Authority – No Place Like Home (NPLH) • “social bond” that funds “social projects” as defined in the Social Bond Principles adopted by the International Capital Markets Association • NPLH program administered by the California Department of Housing and Community Development (HCD)
• first large municipal bond program created to invest in homeless housing infrastructure and secured directly by taxes on high-income residents • funds permanent supportive housing for persons who are or at risk of experiencing homelessness, chronic homelessness, and who are in need of mental health services
• received “Deal of the Year” award from the Bond Buyer newspaper, which recognizes innovation in municipal finance
• City of Burbank has $3.9 M invested in total
ECONOMIC
CONDITIONS
CITY TREASURER’S
OFFICE
Unemployment and Wages
Despite a low 3.6% unemployment
rate, the labor force participation
rate shows the economy is still
missing around 3 M workers
The Labor Department estimates
at least $163 B in unemployment-
related “overpayments” with
significant portion due to fraud
Savings and Consumer Spending
JP Morgan analysis indicates that US
consumers still have around 6 to 9
months of spending power left
In a Fidelity survey, 45% of people
aged 18 to 35 “don’t see a point in
saving until things return to normal”
As the savings rate hit a 14-year
low, Consumer Spending remains
strong for services
Inflation
Inflation reached 8.6% in May, higher
than expected, and price increases
are now measured against a higher
baseline when prices started to rise
With Russia’s invasion of Ukraine,
inflation has now spread with the UK
at 9% and the Eurozone at 8.1%
Primary drivers are
energy, food,
shelter, and airfare
Commodity Prices
Prices for most major commodity
groups are expected to remain above
pre-war forecasts until at least 2024
Russia is the second largest producer
of oil in the world, and with supply
disruptions, the average gas price in
the LA region is now at $6.42/gallon.
US Home Sales
Demand has weakened, but
remaining buyers rush to purchase as
rates go up. The typical home is sold
in just 15 days, the fastest on record
While the average US mortgage
payment of $2,514 is a record high,
the share of listings with a price
reduction is also approaching a high
30-year fixed rate
currently ~5.9%, the
highest since 2008
Burbank median
sale price now at
$1.16 M
Asset Prices and Recession Probability
S&P down 23% from
all-time high in January
Bitcoin down 70% from
all-time high in November
WSJ survey shows
recession probability at
44% in next 12 months
OUTLOOK AND
STRATEGY
CITY TREASURER’S
OFFICE
5-Year Treasury Yields
Yields have jumped significantly in
last few months as the Fed
attempts to fight inflation
Fed Rate Hikes
In an effort to rein in inflation, the
Fed raised rates by 75 bps this
month, the largest hike since 1994.
The Fed expects its target rate
to end 2022 at 3.4%, and
peak at 3.8% by the end of 2023.
IMF World Economic Outlook
Ongoing Strategy
• Credit monitoring of current holdings
• Comprehensive due diligence of new investmentsSafety
• Maintaining liquidity to take advantage of rising rates and to meet cash flow requirementsLiquidity
• Tactical allocation and dollar cost averaging while
investing opportunistically during volatility
• Maximizing yield to protect against inflation
Yield
CITY TREASURER’S
OFFICE
Questions?
Krystle Palmer
City Treasurer
(818) 238-5880
[email protected]