Presentation - Schedule of Investments – Office of Nikki Alvarez-Sowles, Esq., Pasco County Clerk & Comptroller – End of 2nd Quarter FY21
What the county recorded
Staff recommendation
No Action Required
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The source document
The county’s agenda for Board of County Commissioners, Jun 8, 2021
The published PDF, as served by the county. This item is one entry in it.
The county’s minutes for Board of County Commissioners, Jun 8, 2021
The published PDF, as served by the county. This item is one entry in it.
This case, across meetings
CO-21-0163 in full →Heard once. CO-21-0163 appears on no other agenda in the archive.
- Jun 8, 2021BoardR72▶No disposition in the minutesthis item
What was said
Machine transcription of 15m of recording, with speaker names inferred from voice matching. 86% of 58 lines carry a name. It shows what was said, not what was decided, and both the words and the names can be wrong.
Our regular items.
Okay, now we go to the regular agenda. Each regular item as it's called in order. Let's see where I'm at here.
R seventy two.
Mr. Chair, that is my item. And if you if the commissioners remember about six months ago-ish, uh this board had requested that my office present in on a semi-annual basis the schedule of investments of the county. So I think this is really great timing to be able to do that today. Okay. So we will continue to do that going forward around every six months to present the schedule of
investments to you and we do submit it quarterly to you just the schedule itself so you'll have that if we don't have a presentation. So up at the podium we have Mr. Scott Stitcher He is the Director of Relationship Manager, uh Management, I'm sorry, with PFM. and attending virtually with PFM if there's any questions are Sean Gannon, Senior Managing Consultant with Relationship Manager.
Scott Sweeten, the Senior Managing Consultant as a client manager, and Steve Alexander, who is the managing director. Also up at the podium is my office's finance director, our director of financial services, Manny Long. And in the audience, if need be, we have Matt Lazar, who is the Assistant Finance Director, and also our Chief Administrative Officer, Heather Grimes. So I would like for to the for Mr. Stitcher
as well as Mr. Long to be able to present the investment to you. Thank you.
Thank you, Madam Clerk. Mr. Chairman and Commissioner is very good to be with you this morning in person. We appreciate the opportunity. As uh the clerk mentioned, my name is Scott Stitcher with PFM Asset Management. We've been entrusted to manage a high-quality fixed income investment portfolio on behalf of the county. Uh we do so within the parameters set forth by Florida State Statute 218.415. as well as the County's ordinance and investment
policy And as uh you probably know, the main objective of that state statute and your policy is the safety of principle, followed by liquidity, and then you. I want to make some brief Economic backdrop comments. They kind of support the performance numbers that we'll look at here in a second. As we when we last spoke, we talked about the fact that the pandemic continues to shape global the global markets
and economy. That really hasn't changed. We felt that business as usual would uh is not likely to return to normal. until a vaccine is widely distributed. Uh the good news is we've seen marked improvement in the economy and we've seen marked improvement in the rollout of the vaccine with now roughly 42 percent of Americans fully vaccinated, about 140 million. People. The Fed has in that time period has reaffirmed its commitment to utilize the full
scope of its monetary authority. uh until a a full economic recovery is achieved. Uh they were doing so by keeping short-term rates very short in a range of zero to point two five percent. Why is that important? Well, as a fixed income investor, that truly acts as a headwind to you all. So that is an impediment in higher returns in the near term. They also continue to plan to purchase $120 billion a month in treasury and mortgage-backed
securities to maintain that liquidity and keep interest rates in check. The Fed has Has come out and been very transparent. They've said they anticipate the rollout of the vaccination, the trillions of dollars in fiscal stimulus. They're uh their their efforts in monetary policy to uh impact the economy we and and they anticipate the fastest expansion uh of the US economy in 30 years. They've increased their projections and growth from 4.2% to
6.5% as a result of that. With all that said, with that backdrop, what we saw in the first quarter of 2021 was interest rates on the longer end of the yield curve increased dramatically with this optimism of improved economic growth as well as the anticipation of inflation that would come along with that. So what that means is longer duration or longer
uh maturity benchmarks actually saw slightly negative returns uh during the quarter. And again we're gonna take a closer look at this uh in in a little bit but before we get to that though I thought I'd turn it over to you Manny to talk a little bit. Yeah thank you.
Thank you, Commissioner. Appreciate this. Uh even with the low interest rates that we're seeing, we continue to meet the benchmarks that are set forth for the short term and long term bond funds. Again, first and foremost, as Scott mentioned, uh we are maintaining the safety and security of the principal uh Pasco County funds. Um as of the end of the second quarter, March thirty first, twenty. The total unrestricted portfolio as you'll see on the screen there is $1.17 billion. The
short-term investment distributed out from the Florida Trust day-to-day fund is $566 million. The SBA $110 million with $10.5 million in the local government investment pool, the Florida Club. Total investments that we actually manage is $1.5 billion at three uh at March 31st, 2021. Um again $320 million that is restricted investments that we do.
Longer-term investments are with uh PFM $215 million. Uh Florida Trust uh short-term bond fund $257 million. And $10.6 million in CDs with qualified public depositors. Again, this is our March 31st, 2021. We do see that on the next slide. If you can go to the next slide there, when we are looking at our in the Pasco County's investment policy, you'll see that the gold bars are
the limits for our investment policy, the blue bars are where we Are within that restricted investment policy. So when you look at our local government investment pools, we were at 71.39%, almost at our limit of 75% for local government investment pools. We do have another slide a little later on that we can kind of show you that we moved money out of our local and government local government investment pool to longer-term duration. that we could actually take uh
advantage of like Scott mentioned on the longer uh term uh yield curve there. So And I'll turn it back over to Scott here. Thanks,
ma'am.
So I'm going to fast forward to slide six within the presentation and focus on the pool of money that PFM is responsible for. So what Manny just shared with you is countywide looking at all the assets in aggregate, and we are again a portion of that pie, so to speak. So on page six, actually six through seven. is a summary of uh again the the assets that we're responsible for. I'll pause for
a second for that for the presentation to catch up. Mr. Chairman Mariano
I I never got a copy of this presentation. It doesn't show up on the computer either, so when you talk like sixty pages, we don't we're not seeing it, right?
I don't know what to say. It was submitted, I don't know, like three weeks ago.
No, because it's not shown on my computer, so until this thing rolls along I don't see it. So I see page six now. Okay. So
no when we submit them, I don't know how it gets to the commissioners. I I don't have a copy.
Oh yeah. I wasn't printed a copy.
Well even in even on the the computer agenda it didn't show what that you could there was it wasn't an attachment card.
I don't know. If we submitted it like three weeks ago.
I'm looking at a paper copy of my book, you know.
Yeah.
Okay.
Would you like to have someone downstairs print it for you?
Or at least email it to us so we have a copy of it. Right?
Is there is there a a different process being
a little bit more?
I don't know, just let me know what the if you w a different process to follow. Um and we'll do that.
Yeah, just f I mean just for th for the future let's have it. We we'll get a copy, we'll look at it, we can bring any questions we have later, but
Please make us a copy of the um paperwork for R seventy two.
Mm-hmm. All right. Thank you. She'll make us all account, so
Okay. All right, thank you. So so on page six is a summary of the investment portfolio again that PFM is responsible for. I'll just point out some high-level details around the portfolio. And and note that we ended the first quarter of 2021 with a market value of $215,630,729. The average credit quality of the portfolio stands at double A, and that's represented in that
pie chart in the upper left, where we give you the S ⁇ P ratings of the portfolio. I also note that I mentioned earlier we manage a high-quality fixed income portfolio. It's a very diversified fixed income portfolio, and that's represented in the sector allocation breakdown in the pie chart in the upper right. Why is that important? Well we're going to talk about that when we when we look at the performance. It's something that worked against you in the first quarter of 2020, but has uh benefited
you uh very much since that time. Also points you to the yield at market on this portfolio. It stands at about a.61%, the yield at cost at 1.27%. Again, why is that important? Well, those numbers are quite significant when you look at your alternatives on the short end, like money market funds, local government investment pools, and bank accounts. So the the yield pickup on the large Longer duration portfolio is quite substantial in this
environment and has been beneficial to the county. I also point you to the maturity distribution on the bottom. You can see that the majority of the portfolio is invested in that one to two and two to three year part of the yield curve. And again, why is that important? Well, that means you've locked in your income for a longer period of time. That means you have less securities maturing, which need to be invested in today's rate environment at lower yield. So you've locked in yield
for a longer period of time. And again, that will benefit you in this low rate environment. I want to go to page seven. And just look at performance here briefly. It's it Seems like a busy page. I'm going to point you to a couple data points on it. What you're looking at is the four most recent quarter ends of performance as well as one and three year annualized returns. And I'm going to point you to that first column that uh ending for the period ending March 31st,
2021. And you'll note the portfolio was flat for the quarter at zero percent. Neta fees slightly negative at a negative point zero two percent, but we did. Outperform the benchmark. I mentioned earlier that interest rates rose during the quarter, which was not good for longer duration securities. And the poor the benchmark was down a negative 0.05%. So about three basis points or 0.03% of outperformance for the quarter. Uh I
want to focus on something a l uh a a little uh longer in nature and look at that one year number. as one quarter truly does not create a trend. Uh and point point you to the total return for the portfolio for the trailing twelve months ending March 31st. The portfolio was up 1.98%. After fees 1.92%. versus the benchmark 0.26%. Why is this significant? What's not on here is the end of the first quarter in 2020 when
you saw this flight to quality when It was evident that the pandemic was upon our shores and a diversified strategy worked against you. So I commend the clerk and the staff At the county in remaining true to the investment discipline, remaining true to your investment policy. And remaining in a diversified strategy. It clearly uh worked in your favor if you look at that 630. 2020 column when the portfolio and the uh fixed income markets
came roaring back as the Fed stepped in and provided liquidity in the markets. So again that uh sticking to your debt discipline definitely contributed to that one-year number. So again, I commend uh the the the county staff. Let me stop there, see if there are any questions. If not, I'm gonna hand it back over to man.
Okay.
Thank you.
Any questions so far?
By having questions.
Not seeing any. Uh if we can go to the next page, uh page eight. And this is the uh end of April 30th, uh, 2021, just to kind of show um as you remember from the uh previous slide that we were at 71.39 percent in local government investment pools. Uh we did move a significant amount of money um to PFM. You can see they're unrestricted longer term. Term investments at now $368 million when at the end of March we
were at I think it was two hundred and fifteen million dollars for that. So uh we moved quite a quite a bit of money on there to take advantage of uh PFM's uh expertise and uh some longer term investments on there. So I think that's kinda all I have here, Scott, unless you had anything else that we can answer any questions that you all might have.
Yeah. Any questions or commissions? Uh if you don't have any the we'll get the paperwork, we'll get a copy, and each commissioner will be received one. We'll we'll give it to them. So they want to refer it back to Yeah.
Okay. Thank you. Thank you.
Thank you.