Audit & Finance Committee Meeting
Special Meeting
September 11, 2023
Chair Report
Staff Report
Peninsula Clean Energy
Staff Report
Audit
oAudit Update
o Continuing audit activities
o Picenti & Brinker
oAudit Schedule - on schedule
oOctober 16 - Target for Audit & Finance Committee to review draft audit financials
oOctober 26 – Target for Board of Directors approval of Final Audited Financials
Investment Management
and
Investment Policy
Discussion
Peninsula Clean Energy
Context and Current Status
Cash and Investment Management
o Cash Balances have grown significantly
o In response to financial turmoil in early 2023, directive to quickly diversify to other institutions
o Added Fidelity
o Added Schwab
o Invested in Money Market Institutional Money Market Funds at both o Current Status relative to Investment Policy #19
o Total investment in Money Market Funds exceeds 20% maximum policy o Investment in each Money Market Fund exceeds 10% maximum policy o Some of PCE’s portfolio is actively managed by PFM and First Republic Peninsula Clean Energy
Cash/Investment Balances – Summary
7 As of July 31, 2023
Institution Amount Investment Mix
Fidelity $60.8 million Fidelity Institutional Money Market Government Portfolio
First Republic (Operating) $23.4 million Cash
Schwab $56.9 million Schwab Treasury Obligations Money Fund US Bank (as Custodian) $124.9 million Cash and Fixed Income Portfolio • PFM - $64.6 million
• FRB - $60.3 million
Total $266.0 million
Peninsula Clean Energy
Areas to Discuss/Evaluate
oRevisions to Investment Policy
oReduction in number of institutions
o Limitations on amounts in each institution
o Implementation of investment management (with laddering) with other money managers
Peninsula Clean Energy
PFM Assisted with Most Recent Investment Policy Changes oAsked Monique Spyke to walk the AF Committee through where we are and what changes PFM would recommend.
oPFM provided
o Redline to PCE’s current Policy #19 reflecting the changes that will be presented here
o Memo summarizing the changes – will be distributed to Committee after this meeting
PFM Asset Management LLC
NOT FDIC INSURED : NO BANK GUARANTEE : MAY LOSE VALUE
| pfmam.com
PCE Portfolio Allocation
Discussion
Monique Spyke, PFM Asset Management LLC
415.393.7259
For Institutional Investor or Investment Professional Use Only – This material is not for inspection by, distribution to, or quotation to the general public
September 11, 2023
PCE Investments as of July 31, 2023
11 Data as of July 31, 2023. Includes funds invested with PFMAM, First Republic Bank, Charles Schwab, and Fidelity.
PCE Investment Policy dated May 28, 2020. California Government Code Section 53601.
MMF
Individual 49%
Securities
51%
Core/Liquidity Allocation
Sector Market Value % of Portfolio Permitted by
Policy
Permitted by CA
Government Code
Money Market Funds $117,850,687 49% 20% 20%
U.S. Treasuries $76,858,560 32% 100% 100%
Corporate Notes $31,837,771 13% 30% 30%
Municipals $6,345,403 3% 20% 100%
Agency MBS $5,054,746 2% 100% 100%
Federal Agencies $1,789,894 1% 100% 100%
Negotiable CDs $1,335,257 <1% 20% 30%
Total $241,072,319 100%
Fidelity
25%
Charles
Schwab
24%
PFMAM
26%
First Republic
25%
Allocation by Advisor
PCE Money Market Fund Allocation
12 Sector Current
Market Value % of Portfolio Permitted by Policy
Permitted by
Code
Money Market Funds $117,850,687 48.9% 20% 20%
Fund
Fidelity FIMM Government Portfolio $50,727,821 21.0% 10% 20% Schwab Treasury Obligation MMF $46,944,854 19.5% Fidelity Govt Money Market Fund $10,051,483 4.2% 10% 20% Schwab Govt MMF $10,001,169 4.1% 10% 20%
First American Govt Obligations Fund $125,360 0.1% 10% 20% Data as of July 31, 2023. Includes funds invested with PFMAM, First Republic Bank, Charles Schwab, and Fidelity.
PCE invested policy dated May 28, 2020. California Government Code Section 53601. ▸ Code and PCE’s Investment Policy places a 20% sector limit on money market funds. ▸ PCE places a 10% limit on investment in any one fund. ▹ Code does not have a fund limit on individual money market funds.
PCE Allocation versus Policy and Code Limits
13 0%
20%
40%
60%
80%
100%
PCE Allocation vs Limits
IPS Limit Current Allocation CA State Code
Data as of July 31, 2023. Includes funds invested with PFMAM, First Republic Bank, Charles Schwab, and Fidelity.
PCE invested policy dated May 28, 2020.
Achieving Policy/Code Compliance
14 Data as of July 31, 2023. Includes funds invested with PFMAM, First Republic Bank, Charles Schwab, and Fidelity.
PCE invested policy dated May 28, 2020.
▸ Options to move portfolio back into compliance
1. Maintain allocations of liquidity and core – transfer at least $69.6 million from the money market funds into other overnight vehicles: LAIF, CAMP, bank accounts, etc.
2. Increase allocation to core portfolio
transfer at least $69.6 million to PFMAM and/or First Republic Bank to purchase individual securities; or
Establish laddered investment portfolio with Schwab and/or Fidelity and transfer assets from money market funds
Sector Current
Market Value
% of
Portfolio
Permitted
by Policy
Maximum
Allowed
Amount to
Move
Money Market Funds $117,850,687 48.9% 20% $48,214,464 $69,636,223 Fund
Fidelity FIMM Government Portfolio $50,727,821 21.0% 10% $24,107,232 $26,620,589 Schwab Treasury Obligation MMF $46,944,854 19.5% 10% $24,107,232 $22,837,622 California Asset Management Program (CAMP)
Overnight Investment Option - LGIP
15 Portfolio Statistics
Weighted Avg Maturity 33 days
Current Seven-Day Yield 5.54%
Weighted average maturity as of 7/31/2023. Current seven-day yield as of 8/29/2023. The current seven-day yield, also known as the current annualized yield, represents the net change, exclusive of capital changes and income other than investment income, in the value of a hypothetical account with a balance of one share (normally $1.00 per share) over a seven-day base period expressed as a percentage of the value of one share at the beginning of the seven-day period. This resulting net change in account value is then annualized by multiplying it by 365 and dividing the result by seven. Past performance is no guarantee of future results. Yields will fluctuate as market conditions change. The current fund performance may be higher or lower than that cited.
Pool Highlights
• AAAm rated (by Standard & Poor’s)
• Same-day liquidity (11:00 a.m. PST cut-off)
• Unlimited transactions via wire, ACH, or
check
• Online account management
CAMP’S OBJECTIVE:
To earn a competitive rate of return while
preserving principal, providing liquidity, and
seeking a stable net asset value (NAV) of $1.00.
• Option to open multiple sub-accounts
• No minimum investment
• Interest paid monthly
• Zero out-of-pocket expenses
• Specialized services for bond proceeds
PFMAM Managed Portfolio Snapshot
16 Source: PFMAM. Market value includes accrued interest.
Portfolio Statistics as of July 31, 2023
Market Value $63,631,285
Yield at Cost 2.33%
Yield at Market 4.81%
Duration 2.51
U.S. Treasury
55%
Federal
Agency
10%
Agency MBS
8%
Municipal
3%
Corporate
Note
22%
Negotiable CD
2%
Sector Allocation
NR
3%
A
16%
AA
75%
AAA
3%
BBB+
3%
Credit Quality
(S&P Ratings)
2%
29% 29%
21%
19%
0%
10%
20%
30%
40%
0-1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years
Maturity Distribution
Summary of Investment Policy review recommendations:
▸ Address changes to California Government Code
▹ Add language on forward settlement (SB 1489, effective 1/1/23) – Policy section Acceptable Investment Instruments ▹ Add language on calculating a security’s term to maturity (SB 1489, effective 1/1/23) – Policy section Maturity Limit ▹ Add language on submittal schedule of quarterly reports, extended from 30 days to 45 days (SB 1489, effective 1/1/23) – Policy section Reporting
▹ Delete language from commercial paper paragraph that was deleted from Code (SB 998, effective 1/1/21) – Policy section Acceptable Investment Instruments
▸ Consider expanding list of allowable investments to enhance diversification and return potential ▹ Add language to allow for investment in supranationals (Code §53601(q)), and asset-backed securities (Code §53601(o)) – Policy section Acceptable Investment Instruments
▹ The language we suggest matches Code language, except that we are recommending a 5% issuer limit on these investment types where Code has no issuer limit
PCE Investment Policy Review
17 Review of PCE’s Investment Policy dated May 28, 2020.
Disclaimer
Investment advisory services are provided by PFM Asset Management LLC (“PFMAM”), an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bancorp Asset Management, Inc. (“USBAM”). USBAM is a subsidiary of U.S. Bank National Association (“U.S. Bank”). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of PFMAM. The information contained is not an offer to purchase or sell any securities. Additional applicable regulatory information is available upon request.
For more information regarding PFMAM’s services or entities, please visit www.pfmam.com.
Disclaimer
Investment advisory services are provided by PFM Asset Management LLC (“PFMAM”), an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bancorp Asset Management, Inc. (“USBAM”). USBAM is a subsidiary of U.S. Bank National Association (“U.S. Bank”). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of PFMAM. The information contained is not an offer to purchase or sell any securities. Additional applicable regulatory information is available upon request.
For more information regarding PFMAM’s services or entities, please visit www.pfmam.com. 18 Committee Members’ Reports
Adjournment