Investment portfolio and market update

1:52:44Thank you. Moving on. Rez. Res, which one are we? R thirty five. R thirty five. R thirty five.

1:52:56This is the clerk's issue. Clerk's item.

1:52:59It's not an issue. Not an issue.

1:53:01It's an item.

1:53:02So that was time

1:53:03certain at eleven, so

1:53:05the podium. Um is Sean Gannon. He's the institutional sales and relationship manager with uh PFM, which is our um Our agency that helps us with our investments. And then we also have my uh director of our financial uh services div department, Matt

1:53:28Lazar, thank you.

1:53:31Hi, good morning and and thank you for bidding me in here. I appreciate it. Um I am here as the relationship manager for your account for um from PFM Asset Management. We manage the operating funds, uh short term cash for the county. Uh so I'm gonna give a brief market update, two slides here, and handed it back to Matt. Um but you could progress to the next slide. Do I have a clicker?

1:53:53Thank you. Um so I'll be pretty pretty brief here. I'm not gonna read off the slide, but ultimately um what again what we do is manage the investments in short-term fixed income. So uh what we're looking at is safety of principle first, preservation of capital, uh liquidity, and then yield as our primary drivers of uh management. So when we think about the markets today, as you can imagine, they are in a very uncertain and volatile time with a lot of changes that come rapidly and unexpectedly.

1:54:25So ultimately, what we're looking at now here is the impact of tariffs and what the Federal Reserve is going to do, because what they do often directly impacts your portfolio, the investment return. and liquidity. So the Fed is meeting today, their first first day of the two-day meeting today, and then tomorrow they should have a decision on if they're going to move interest rates or not. Ultimately Uh that will again have a a pretty direct impact on you all whether we see uh

1:54:55you know the investment income match what was budgeted, uh planned out for, um, and ultimately uh what we expect there. Uh yeah, we're gonna talk a little bit about the portfolio in a couple slides, but just to show the yield curve here, uh we have seen a a uh deep decline over the month, uh the months of the first quarter. uh that was very favorable for returns in your portfolio. Again, for fixed income generates positive performance when rates fall. So we had

1:55:25a a pretty strong quarter of of performance there. And then we're kind of on a tight agenda, so I'll pause for any market update questions before handing it back to Matt.

1:55:37I don't think there are any. You can proceed. All right.

1:55:43You're way too tall for me to have to look at that. All right. So we'll go even quicker through this here, but what you're seeing on this slide, this is taking what Sean just talked about, and now this is your portfolio specific to Pasco County that uh my team uh that the clerk's office manages. The total portfolio for the county currently stands at two point one billion dollars with a B. Um what you're seeing on this slide. Is deemed unrestricted, and what we're talking about unrestricted is not tied to a bond issuance or a debt covenant.

1:56:14So on here, what you're gonna see in the top left that is the diversification of the county's portfolio. So as you can see, we are not too heavy in one investment pool or one investment type. What that allows us to do is especially when we have conversations with excuse me, with Sean. and our other investment advisors is it allows us to be both reactive, which you need to be able to do, right, in an uncertain market, as well as be proactive and predictive. So that really allows us to do that with the way we've

1:56:44set up the funding sources. Going further down on the slide, you will see about 70% of the unrestricted portfolio is in short-term investments, which is anything under a year. Currently, if you look to the far right, that range is anywhere from 25 days all the way up to just under three months. What we're finding is that second line on the slide there, the Florida POM term is very favorable for the county. That is the putting in a certain balance for a guaranteed amount of time,

1:57:14guaranteeing a certain percentage return. We're seeing with all that we have invested about a 5% return, which is well above the benchmarks that we're seeing that we compare to on a quarterly basis. Moving down even further, you'll see those are our long-term investments and those are anything a year and above. Right now we're trying to find that good balance of short versus long term. We don't want to go too far into the long term and lock ourselves into unfavorable rates, but we also don't want to stay short term for too long and lose out on the benefit of

1:57:45the you know having a longer out on the yield. With that, I will talk more just briefly before I go to the last slide. I'm gonna talk about is overall for the portfolio for the fiscal year, the county has seen an influx of $38 million in interest income earned through the efforts of my team. We anticipate that at least increasing uh by another 16 million, and that would just be attributed to that form.

1:58:13So all in all, looking like we're gonna have another good year here. It's been very easy for me to have these discussions with you because we're talking about positive numbers. So we'll hope to keep it that way. Any questions before I go to the next slide? I have I have a question. Sure.

1:58:28Um

1:58:28do

1:58:28you want to ask

1:58:28one

1:58:29first? I

1:58:29just

1:58:29I can just give a comment. Uh these are tremendous returns compared to what we've seen last year uh the f previous years. You guys have moved it up gradually all the way through and you're really doing a phenomenal job. So thank you for that.

1:58:40Thank you.

1:58:41Um my question is to the county administrator. When when we earn this interest, what where does it go and how do we spend it?

1:58:49So we do account for this uh for a certain level of returns into our budget. I believe it goes into general revenue, it's part of your general fund, depending on which fund earns the interest, of course it goes back into that. But we we do make accounting for for these earnings when we do plan budgets. Eric. if there's anything else to add and I know Amy is here in the wanted more detail than that.

1:59:10Well is was that a quarterly amount? What was that amount that you said? The

1:59:13thirty that's for the first two quarters of this fiscal year.

1:59:1738 million. So do you did you budget 38 million? Or are you so I'm just looking for money to do things with

1:59:24bond funds. There's a dis unrestricted. This is unrestricted. Yeah exactly. They could be utilities or solid waste dollars, they they go back to their fund. So in the aggregate, thirty

1:59:33eight million. Wait a minute, wait. Why would that why would this money go to utilities when that's an enterprise fund?

1:59:38If it was utilities money.

1:59:40Oh depending on the silo that earns the interest, it rates depends on where

1:59:43where the money is going.

1:59:44Right, okay what fund

1:59:45it comes out of it.

1:59:48Well, Board members, do we want to see that quarterly? Just have a little I don't know, I just it's like money that we don't really see what happens to. Kind of. Thoughts. We submit um Well he sees it but we don't see it. I'm just saying.

2:00:04I could show you all of it if you'd like to see it.

2:00:07Well I think we would like to see it. That's part of our responsibility, I think.

2:00:10Mr. Carbell, if you need anything from our office, we're happy to help you. Okay. Go next.

2:00:16If I click the right button here, there we go. Alright, so right now I was talking about being reactive to the market uncertainty, but also have being able to predict. My crystal ball isn't as crystal clear as it usually is. So what we like to do on the sector analysis is we like to make sure we are not only aligning with Florida statute, which talks about you know safety of principle, liquidity, and obviously maximizing return, but also in the investment. Policy that the county adopted. And what we're seeing here in the gray bars that is the restriction limit per the investment

2:00:47policy. Shaded in blue is where we currently sit overall. What you're seeing is we're well below all the limits, which is amazing because what it allows us to do is allows us to be free to make decisions which are best for the taxpayers and for the county. So we really like to see those blue bars be as low as possible. Um it it really allows us to make great decisions, which uh you know as Commissioner Mariano stated, we're able to see those returns uh accelerate. We're able to make very, very great decisions and collaborating with the board makes it much easier as

2:01:17well. So um with that I will stop for any other questions before I give it back to you Sean.

2:01:22I I I want to say also great job, especially with what's been going on. on in my retirement fund account. So um good job. Do you want us to manage that? Yeah. Well state of Florida's managing it. Um okay.

2:01:36Yeah. Bob. If it's okay with you all, I'd like to skip to the last page here. Sure. Okay. Second to last page. Just to talk about returns for for the portfolio that we manage. As you saw on the previous slide, Matt mentioned that there are a lot of uh liquidity vehicles that you use. This is kind of the the maximized return component. You know, once a safety and liquidity have been achieved, uh we you know we manage an additional longer duration. Yeah. Uh and just look at the past quarter,

2:02:06uh 1.6% return on a the the one quarter, right? So over a three-month period, uh you know very favorable returns just because of the the dramatic movement downward of interest rates. Um over the past year, uh 5.67% return uh for this this piece of the portfolio. Um so very strong returns for for this portion. Uh Uh as Matt mentioned, um, you know, thirty-eight million over the past uh six months, just over this past quarter, you know, our this this sleeve

2:02:36made about thirty percent of it returned, you know, seven million. Um so very very good numbers, very strong returns uh that we've seen, much nicer than than the negative numbers when interest rates are rising, but um ultimately it's in a in a pretty good spot.

2:02:52I just wanted to clarify Mr. Yannon. Yes. So the seven point four in the quarter return is is would be in addition to the portfolio that um Mr. Lazar is managing. So it's it's it's additional. It's one of them. Oh. So this is also unrestricted revenue that but that we we have um we have some money that my office manages for the county and then we utilize uh PFM to do other investments go out longer term than our uh than our office does.

2:03:21Mm-hmm. Yes, thank you.

2:03:22So I wanted to make sure you understood that it's additional.

2:03:28Thank you.

2:03:29Um and the last slide here is just of that longer duration portfolio, just looking at the accrual based earnings, so different ways to kind of account for them, not taking into account market value movements. Um but ultimately I know kind of pressed for time, so I'll I'll pause there uh and see if you guys have any questions about the portfolio, the returns, the markets, anything like that.

2:03:49Any questions? Yeah. Great job.

2:03:52Great.