Dollars and Sense
When the financial markets ride high, local government is often criticized for its conservative investment practices. However, the history of cities investing "outside the box" is littered with stories of entire portfolios being destroyed due to one foray into derivatives or some supposed "can't lose" hedge fund.
The City of Manteca has a long history of being prudent yet very successful in gaining strong returns on its investment portfolilo. This week's "The Week in Review" has a nice summary of how our numbers stack up during these difficult times:
Status of City’s Investments: With the volatility in the stock market that has occurred over the past 12 months, questions regarding the stability of the City’s portfolio may be raised. In April 2002, the City engaged the services of The PFM Group to manage our investments. The benchmark that was selected to compare our portfolio’s performance to was the Merrill Lynch 1-3 year U.S. Treasury Index. When PFM began to manage our portfolio, the portion invested in long-term investments was approximately $43 million, and represented about 59% of our total investments. Today, the long-term investment portfolio has grown to over $127 million and represents over 80% of our total cash and investments. All investments meet the requirements set forth in the City’s Investment Policy. The goals for the portfolio continue to be safety (protection of principal), liquidity, and the return on investment. A total of 44% of the portfolio is invested in 1-2 year investments, with 55% of the portfolio being invested in Federal Agencies (FNMA, FHLB).
With an investment strategy designed to maintain the safety of the City’s investments, while allowing us to take advantage of changing market conditions, we have been able to attain a 5.46% return over the past 12 months. Over the past 6 ½ years, the portfolio has averaged a 4.01% return, as compared to the Merrill Lynch benchmark of 3.87% return for the same period of time, and an average LAIF (Local Agency Investment Fund) rate of 3.06%. During this fiscal year alone, the City has received $1.8 million in investment gains as a result of employing PFM’s investment strategies. As market conditions continue to change, PFM will continue to shape strategy that will allow the City to meet our benchmark targets while ensuring the safety of principal.
By the way, if you don't already read "The Week in Review", it is a great way of keeping up with all the activities provided by your local government.
The City of Manteca has a long history of being prudent yet very successful in gaining strong returns on its investment portfolilo. This week's "The Week in Review" has a nice summary of how our numbers stack up during these difficult times:
Status of City’s Investments: With the volatility in the stock market that has occurred over the past 12 months, questions regarding the stability of the City’s portfolio may be raised. In April 2002, the City engaged the services of The PFM Group to manage our investments. The benchmark that was selected to compare our portfolio’s performance to was the Merrill Lynch 1-3 year U.S. Treasury Index. When PFM began to manage our portfolio, the portion invested in long-term investments was approximately $43 million, and represented about 59% of our total investments. Today, the long-term investment portfolio has grown to over $127 million and represents over 80% of our total cash and investments. All investments meet the requirements set forth in the City’s Investment Policy. The goals for the portfolio continue to be safety (protection of principal), liquidity, and the return on investment. A total of 44% of the portfolio is invested in 1-2 year investments, with 55% of the portfolio being invested in Federal Agencies (FNMA, FHLB).
With an investment strategy designed to maintain the safety of the City’s investments, while allowing us to take advantage of changing market conditions, we have been able to attain a 5.46% return over the past 12 months. Over the past 6 ½ years, the portfolio has averaged a 4.01% return, as compared to the Merrill Lynch benchmark of 3.87% return for the same period of time, and an average LAIF (Local Agency Investment Fund) rate of 3.06%. During this fiscal year alone, the City has received $1.8 million in investment gains as a result of employing PFM’s investment strategies. As market conditions continue to change, PFM will continue to shape strategy that will allow the City to meet our benchmark targets while ensuring the safety of principal.
By the way, if you don't already read "The Week in Review", it is a great way of keeping up with all the activities provided by your local government.
posted by City Manager @ 7:29 AM
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