February 28, 2020 City Hall - Room 140 1 Dr. Carlton B. Goodlett - - PowerPoint PPT Presentation

February 28, 2020

Office of the Treasurer & Tax Collector City and County of San Francisco

Tajel Shah, Chief Assistant Treasurer Robert L. Shaw, CFA, Chief Investment Officer

José Cisneros,Treasurer

City Hall - Room 140

• 1 Dr. Carlton B. Goodlett Place
• San Francisco, CA 94102-4638

Telephone: 415-554-5210

• Facsimile: 415-554-5660

Economic & Market Overview Strategy The Economic Outlook Pooled Fund Review Pool Participants Breakdown Appendix A January Monthly Report 2020 3-5 6-8 9-13 14-17 18-19 20 Separate handout

2

Source: Bloomberg

3

0% 2% 4% 6% 8% 10% 12% 62% 63% 64% 65% 66% 12/09 12/11 12/13 12/15 12/17 12/19

Wage Growth & Unemployment Rate Labor Participation Rate

Employment

Wage Growth Labor Participation Rate Unemployment Rate

38 41 44 47 50 53 56 59 62

• 1%

0% 1% 2% 3% 4% 12/15 12/16 12/17 12/18 12/19

Gross Domestic Product

GDP Year-over-Year Change ISM Manufacturing PMI ISM Non-Manufacturing PMI

• 1.5%
• 0.5%

0.5% 1.5% 2.5% 3.5% 12/15 12/16 12/17 12/18 12/19

Producer Price Index vs Consumer Price Index

Core CPI Core PPI CPI PPI

0K 1,000K 2,000K 3,000K 4,000K 5,000K 6,000K 7,000K 8,000K 9,000K 0K 100K 200K 300K 400K 500K 600K

12/09 12/11 12/13 12/15 12/17 12/19

JOLTS & Jobless Claims

US Initial Jobless Claims US Job Openings

0K 100K 200K 300K 400K 500K 600K 700K 800K

1 2 3 4 5 6 7 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 12/18 12/19 Millions

Housing

Existing Homes Sales New Home Sales

Existing Home Sales Growth is Neutral.

Source: Bloomberg

4

100 150 200 250 300 11/09 11/10 11/11 11/12 11/13 11/14 11/15 11/16 11/17 11/18 11/19

S&P/Case-Shiller Home Price Indices

20 Metro Composite San Francisco Area

5

1.2% 1.3% 1.4% 1.5% 1.6% 1.7% 1.8% 1.9% 2.0% 2.1% 2.2%

3M 1Y 2Y 3Y 5Y

UST Yield Curve as of 8/23/2019 UST Yield Curve as of 11/8/2019 UST Yield Curve as of 02/7/2020

Source: Bloomberg

UST Yields 11/8/19 2/7/20 Change 3M 1.54 1.55 0.01 6M 1.56 1.56

• 0.01

1Y 1.57 1.47

• 0.10

2Y 1.67 1.40

• 0.27

3Y 1.70 1.39

• 0.31

5Y 1.75 1.41

• 0.34

6

7

August 2019: Airport ($957 Million); and October 2019: CCSF ($97 Million) 0.74 December 2019: 0.99 December 2018; 0.95 December 2017; Purchasing Securities that mature on (or slightly before) a known need – such as Payroll, Debt Service, Capital Projects, etc.; and Opportunistic Investing.

8

Labor participation rate is range bound – despite the large number of job opening; Asset prices (such as US Equities) have been very volatile over the past year; Interest Rates: Shifted quickly from Increases to Decreases – Now in Pause; GDP: The best positive among the factors – but declining; and Average Hourly Earnings remains above 3.0%.

9

Factor Current Situation Low unemployment rate 3.5% (50 Year Low) – Holding steady Increasing asset prices (stocks, real estate, etc.); S&P 500 (+18.3% - since 2009 Trough) Low Interest rates; Below historical norms & falling Brisk but steady GDP growth; and > 2.3% past several years Low inflation Low (2.5%), but trending upwards

10

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Date of inversion Start of recession Number of months 9/17/1978 1/2/1980 15.5 9/12/1980 7/1/1981 10 8/11/1989 7/1/1990 11 2/2/2000 3/1/2001 13 2/1/2006 12/1/2007 22 8/31/2019 ? ?

12

13

14 0% 10% 20% 30% 40% 50% 0 TO 1 MONTHS 1 TO 3 MONTHS 3 TO 6 MONTHS 6 TO 12 MONTHS 12 TO 24 MONTHS 24 TO 36 MONTHS 36 TO 48 MONTHS 48 TO 60 MONTHS

Maturity Distribution

12/31/2018 12/31/2019

Source: SunGard APS2

0% 10% 20% 30% 40% 50% 0 TO 1 MONTHS 1 TO 3 MONTHS 3 TO 6 MONTHS 6 TO 12 MONTHS 12 TO 24 MONTHS 24 TO 36 MONTHS 36 TO 48 MONTHS 48 TO 60 MONTHS

Effective Maturity Distribution

12/31/2018 12/31/2019

22.4% 5.9% 9.0% 15.0% 48.0% 52.2% 48.4% 41.7% 3.6% 1.7% 1.3% 0.7% 0.3% 0.3% 10.0% 19.5% 18.5% 21.9% 8.8% 9.6% 9.5% 8.4% 1.0% 0.6% 0.9% 0.2% 5.2% 3.5% 4.4% 5.6% 1.0% 7.0% 7.7% 6.2%

• 750

1,500 2,250 3,000 3,750 4,500 5,250 6,000 6,750 7,500 8,250 9,000 9,750 10,500 11,250 12,000 12,750 13,500

12/31/2016 12/31/2017 12/31/2018 12/31/2019

$ Millions

Supranationals Money Market Funds Medium Term Notes Commercial Paper Negotiable CDs Public Time Deposits State/Local Agencies Federal Agencies U.S. Treasuries

15

Source: SunGard APS2

16

FIXED 87% FLOAT 10% STEP CPN 3%

December 31, 2018

FIXED 93% FLOAT 7%

December 31, 2019

Source: SunGard APS2

Name of Fund

Portfolio Size* ($ mns)

Los Angeles County $ 35,695.0 LAIF 26,711.9 City and County of San Francisco 12,325.6 San Diego County 10,943.4 San Bernardino County 7,839.4 Riverside County 7,671.9 Orange County (ex. Schools) 5,625.6 Fresno 4,179.8 Sacramento County 4,140.2 Contra Costa County 3,386.3 Sonoma County 2,712.1 17

Sources: Bloomberg, Sacramento County as of February 5, 2020

* as of December 2019

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19

San Francisco Earned Income Yield S&P Rated GIP Index/All (30-Day Gross) SF Sac Fresno County LAIF Los Angeles County Orange County Riverside SB SD Contra Costa Sonoma 1.2% 1.4% 1.6% 1.8% 2.0% 2.2% 2.4% 2.6% 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900

Weight Average Maturity (in days) Monthly Change in Earned Income Yield

Jan 3, 2020 Dec 31, 2018 Dec 31, 2019

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As of December 2019

Pool Participant Fund Balance Percent of Fund

General Fund/Special City Funds/Internal Services Funds $ 4,726,940,678 38.3% San Francisco International Airport 2,316,019,942 18.7% San Francisco Public Utilities Commission 1,219,000,237 9.9% Other agencies (incl. Transbay Joint Powers, Trial Courts) 1,168,743,777 9.5% San Francisco Municipal Transportation Authority 793,146,261 6.4% Facilities and Capital Projects Funds - General 632,917,999 5.1% San Francisco Unified School District 387,168,211 3.1% OCII - Successor Agency – former SFRDA 271,270,009 2.2% San Francisco General Hospital and Laguna Honda Hospital 239,975,449 1.9% Pension and Retiree Health Care Trust Fund 218,893,976 1.8% Port of San Francisco 205,752,946 1.7% San Francisco Community College District 93,020,751 0.8% San Francisco County Transportation Authority 79,270,926 0.6%

Totals

$ 12,352,121,161 100.0%

Sources: FSP Impromptu

19

Source: December 2006 – 2019 Ending Balance Cognos and FSP Impromptu.

December 31, 2006 – December 31, 2019

2 4 6 8 10 12 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Billions

General Fund/Special City Funds/Internal Services Funds San Francisco International Airport San Francisco Public Utilities Commission Other San Francisco Municipal Transportation Authority Facilities and Capital Projects Funds - General San Francisco General Hospital and Laguna Honda Hospital San Francisco Unified School District

20

• 1. Current Methodology:

a) Coupon Income Earned; b) Amortization of Bond Premiums & Discounts; and c) Realized Gains & Losses from sales d) No large period to period changes in Pool Performance – Yield Stability.

• 2. Book Yield:

a) Similar to Earned Income Yield; b) Does not (always) include impact of Realized Gains & Losses

• 3. Total Return:

a) Earned Income Yield + Changes in unrealized Gains & Losses b) Performance can shift significantly from period to period c) Performance can be negative