AWARD OF CONTRACTS FOR
INVESTMENT MANAGEMENT SERVICES
City Council Meeting
Date: April 19, 2022
Item 15.2
1 Investment Manager Introductions
Monique Spyke – Managing Director, PFM Asset Management Monique Spyke has been with PFM Asset Management for close to 20 years helping local government with development/implementation of investment strategies and management of public funds. She holds a B.A. in Economics and African-American Studies through Smith College.
Carlos Oblites – Senior Portfolio Strategist, Chandler Asset Management Carlos has 26 years of investment and financial experience, focused largely on managing fixed income strategies for governmental and institutional non-profit clients. Carlos holds a Bachelor of Arts degree in History from the University of California, Santa Barbara, and a Master’s degree in Business Administration from San Francisco State University.
2 Background
• The City transitioned to external professional management of its investment pool in 2007 and has utilized both Chandler and PFMs expertise in the past 15 years. • PFM Asset Management provided the City’s investment management services since 2017. • The dynamic nature of investment markets and strict governing guidelines for public funds make recognizing and adapting to change an important factor in portfolio management. • The City requires a full-service investment management firm with the resources to formulate new investment strategies to hedge against risk and capitalize on market opportunities on City’s behalf.
• The current contract is set to expire June 30, 2022.
3 Detailed Description of City’s portfolio
• The City’s Pooled Cash Portfolio consists of:
• Reserve Portfolio, which includes longer-term
securities that are invested to take advantage of
rates offered for maturities out to five years
• Short term holdings which are used to manage the
liquidity needs of the City that include: LAIF,
CAMP , Bank of the West (BoW) accounts
4 City’s Investment Policy & State Code
• Professional management of the City’s
investment portfolios enables us to craft
investment strategies to mitigate market
risks, achieve diversification, and maintain
returns
• Alleviate risk though the following:
• Safety: Diversification & Credit Quality
• Liquidity: Duration & Interest Rate Risk
• Yield: Time Horizon & Yield Curve
5 Selection Process
• The City released a Request for Proposals for investment management services in October 2021, with a submission deadline of December 9, 2021. • The City received 8 eligible proposals for investment management services, and these proposals were reviewed and scored. The top three candidates were then interviewed.
• This process ensured a fair and competitive procurement for these services. • The City’s selection committee reached unanimous consensus to recommend PFM Asset Management LLC and Chandler Asset Management to provide investment management services.
6 Multi-manager Strategy for City’s Portfolio
• Diversity of thought, access to market research/information & performance comparison
• Over 35 years of experience in management of public funds • Dedicated and seasoned portfolio managers for City’s investment portfolio • Ongoing reevaluation of City’s cash flow structure
• Realignment of City’s liquid and reserve portfolios to enhance returns • Detailed reporting, statements and online access to all information 7 Vendor Fee Proposal
• Currently, the City’s annual contract cost for investment management services is based on a tiered structure: 0.06% for the first $100 million, and 0.05% for balances over this amount – which amounts to an annual average of 0.052% or approximately $305,000.
• With this procurement, City staff negotiated a much more favorable pricing of
0.038%, irrespective of the portfolio size, with both investment managers. The City’s new annual contract cost is anticipated to be around $225,000 – generating approximately $80,000 in annual savings.
8 Recommendations
• Authorize the City Manager to execute 5-year contracts with PFM Asset Management LLC and Chandler Asset Management to provide investment management services.
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