Fremont City Council Meeting: 04/01/25 07:00 PM
3300 Capitol Avenue Div/Dept: Finance Department
Fremont, CA 94538 Category: Agreements and Contracts
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 5397) DOC ID: 5397
Updated: 3/28/2025 9:08 AM by Dina Lewis Page 1
INVESTMENT ADVISORY SERVICES – Authorization to Execute a Five Year Agreement for Investment Advisory Services with PFM Asset Management for an annual not-to-exceed amount of $350,000
Contact Persons:
Name: David Persselin
Title: Finance Director
Div/Dept: Finance Department
Phone: 510-494-4631
E-Mail: [email protected]
Executive Summary: To assist with purchasing appropriate investment instruments, monitoring the credit quality of City investments, and achieving a market rate of return, the City engages an investment advisory firm to manage the portion of the City’s investment portfolio that exceeds its near-term liquidity needs.
Staff recently conducted a request for proposals (RFP) process to solicit proposals from qualified investment advisory firms. Having reviewed and evaluated the proposals based on criteria outlined in the RFP, staff recommends that the City Council authorize the City Manager, or her designee, to execute an investment advisory agreement with PFM Asset Management, a division of U.S. Bancorp Asset Management, Inc. (PFM).
BACKGROUND: The City’s Investment Policy specifies that “the City’s investment portfolio shall remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated.” Accordingly, the City has divided its investment pool into a portfolio of highly liquid and short-term investments managed by City staff (the “Liquidity Portfolio”) and a “Core Portfolio” of longer-term investments managed by an investment advisory firm.
The Core Portfolio, currently at approximately $320 million, has been actively managed by PFM since 2013 against a benchmark index consistent with the City’s Investment Policy.
DISCUSSION/ANALYSIS: In FY 2018/19 the City issued an RFP for Investment Advisory Services and selected PFM to serve as its investment advisor. As the investment advisory agreement with PFM ends in the current fiscal year, staff issued a new RFP for Investment Advisory Services on February 11, 2025. Five firms responded to the RFP, and staff reviewed the proposals based on criteria outlined in the RFP. After evaluating the proposals, staff has determined that continuing with PFM as investment advisor best meets the City’s needs.
Accordingly, staff recommends that the City Council authorize the City Manager , or her designee, to execute an agreement with PFM to provide investment advisory services for a term beginning when the previous agreement expires and ending on June 30, 2030.
FISCAL IMPACT: PFM has proposed a fee schedule covering all normal costs for services provided, including travel and out-of-pocket expenses:
Council Staff Report (ID # 5397) Meeting of April 1, 2025 Updated: 3/28/2025 9:08 AM by Dina Lewis Page 2
• 7 basis points (0.07%) per year for the first $50 million of assets under management;
• 6 basis points (0.06%) per year for assets between $50 million and $150 million; and
• 5.5 basis points (0.055%) per year for assets greater than $150 million.
The actual amount of the fee will depend on the size of the City’s portfolio under management. At the current managed portfolio size of approximately $320 million, the annual fee would be $188,500. However, staff recommends an annual not-to-exceed amount of $350,000 to accommodate portfolio growth over the term of the investment advisory agreement.
The investment advisory fees will be deducted from investment earnings each month before they are allocated to each City fund on the basis of average cash balance. In this way, each fund “pays” its fair share of the investment advisory fees.
ENVIRONMENTAL REVIEW: The proposed recommendation is exempt from the requirements of the California Environmental Quality Act (CEQA) in that it is not a project which has the potential for causing a significant effect on the environment.
ATTACHMENTS: None.
RECOMMENDATION: Authorize the City Manager, or her designee, to execute an agreement with PFM Asset Management, a division of U.S. Bancorp Asset Management, Inc., to provide investment advisory services at an annual not-to-exceed amount of $350,000 for a term beginning when the previous agreement expires and ending on June 30, 2030.