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ACCEPT BY MOTION THE QUARTERLY INVESTMENT REPORT FOR QUARTER ENDED JUNE 30, 2016
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RECOMMENDATION
It is recommended that the City Council accept by motion the Quarterly Investment Report for the quarter ended June 30, 2016.
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Summary
Pursuant to California Government Code section 53646 and the City’s Investment Policy (Policy No. 700-7), a quarterly report and certification shall be provided to the City Council, City Manager, and City Auditor. The Quarterly Investment Report shall include a complete description of the portfolio, the type of investments, the issuers, maturity dates, par value and dollar amounts invested on all securities. The certification must provide assurances that investments were made consistent with the City’s Investment Policy and that the City will meet its expenditure obligations for the next six months.
The Quarterly Investment Report for the quarter ending June 30, 2016 is provided as Attachment A. The report has also been posted to the City’s website and may be accessed at:
<http://www.stocktongov.com/government/departments/adminServices/finInv.html>
This report is presented as required and will bring the City current on its reporting requirements.
The City’s total investment portfolio (market value) was $454.7 million as of June 30, 2016. Returns for the most recent quarter were $2.45 million, or 0.56% percent, which include changes in fair market value (Attachment A page 29).
DISCUSSION
Background
To comply with state law and city policy, the City is required to present quarterly investment reports detailing the City’s investment portfolio to the City Council, City Manager, and City Auditor. Monthly transaction reports are also provided to these entities and posted on the City’s website. The authority of the Council to invest or to reinvest funds, or to sell or exchange securities, is delegated to the City’s Chief Financial Officer, who also serves as City Treasurer (Resolution #2016-06-21-1605). Pursuant to the Investment Policy, the City Treasurer may and does delegate some of his/her fiduciary responsibility to an outside investment management firm. An investment manager’s fiduciary responsibility is a legal requirement by virtue of their registration with the Securities and Exchange Commission under the Investment Advisor Act of 1940. Due to the specialized services and expertise required to assist the City in the varied investment options available, the City has contracted with an experienced investment manager, Chandler Asset Management. The authority to contract for investment portfolio management services is granted in City Council Resolution #07-0247. The contract is for a five-year period commencing July 1, 2007, with an option for up to five annual renewals unless terminated by either party under the terms of the agreement.
Present Situation
The attached report details the activities of the quarter ended June 30, 2016 and includes detailed information on the holdings of the City’s portfolio on that date. It includes certification that the holdings are in compliance with the requirements of State law and City policy and that there is sufficient liquidity to cover the subsequent six months of budgeted activities.
The attached quarterly investment report has been published online along with monthly reports.
Portfolio Balances and Performance
The City’s investment portfolio (market value) totaled $454.7 million as of June 30, 2016. The investment portfolio is divided between Liquid and Reserve portions. The Reserve portion represents the long-term assets managed by Chandler, while the Liquid portion represents funds invested in the State of California’s Local Agency Investment Fund and money market funds. Total returns on the consolidated portfolio for the second quarter of calendar year 2016 were $2.45 million or 0.56% percent (Attachment A page 29). This valuation includes funds from all activities, restricted and unrestricted and includes changes in fair market value, but is not netted with the expenses of the pool.
Chandler has provided investment portfolio management services for the City since 2007. City staff works closely with Chandler to monitor the status of the City’s investment portfolio and its returns. The performance of the Reserve portion of the portfolio managed by Chandler is benchmarked against the Bank of America Merrill Lynch index of 1-5 year government securities. Over the last year, the Reserve portion of the City's portfolio outperformed the benchmark by 0.12%. The result was an annual return of 2.51% versus the 2.39% achieved by the benchmark (Attachment A page 24). Annualized quarterly returns for the portion of the portfolio managed by Chandler, shown below for the latest quarter, one year, and two year periods are affected by changes in fair market value.
|
Reserve Portfolio |
Annualized (Benchmarked) Returns |
|
Period Ended June 30, 2016 |
Benchmark |
City of Stockton Reserve Portfolio |
Reference |
|
Quarter |
0.79% |
0.73% |
(Attachment A, page 24) |
|
12 months |
2.39% |
2.51% |
(Attachment A, page 24) |
|
Two Years |
1.88% |
1.97% |
(Attachment A, page 24) |
FINANCIAL SUMMARY
There is no financial impact to the presentation of these reports.
Attachment A - Quarterly Investment Report for Quarter ended June 30, 2016