Treasury Oversight Committee March 9, 2018 City Hall - Room 140 1 - - PowerPoint PPT Presentation

Treasury Oversight Committee

March 9, 2018

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

Table of Contents

Economic & Market Overview Strategy Pooled Fund Review Pool Participants Breakdown Appendix January Monthly Report 2018 3-5 6-10 11-14 15-16 17-19 Separate handout

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Source: Bloomberg

Key Economic Data

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0% 2% 4% 6% 8% 10% 12% 62% 63% 64% 65% 66%

1/08 1/10 1/12 1/14 1/16 1/18

Wage Growth & Unemployment Rate Labor Participation Rate

Employment

Wage Growth Labor Participation Rate Unemployment Rate

47 49 51 53 55 57 59 61 0% 1% 2% 3% 4% 5% 12/12 12/13 12/14 12/15 12/16 12/17

Gross Domestic Product

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

• 1.5%
• 1.0%
• 0.5%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 1/15 1/16 1/17 1/18

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

12/07 12/09 12/11 12/13 12/15 12/17

Thousands

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 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 Millions

Housing

Existing Homes Sales New Home Sales

Source: Bloomberg

Key Economic Data

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100 150 200 250 300 12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17

S&P/Case-Shiller Home Price Indices

20 Metro Composite San Francisco Area

Yield Curve Changes

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0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%

3M 1Y 2Y 3Y 5Y

UST Yield Curve as of 09/01/2017 UST Yield Curve as of 12/29/2017 UST Yield Curve as of 2/28/2018

UST Yields 12/29/2017 02/28/2018 Change

3M 1.38 1.65 0.28 6M 1.53 1.85 0.32 1Y 1.73 2.06 0.32 2Y 1.88 2.25 0.37 3Y 1.97 2.41 0.44 5Y 2.21 2.64 0.43

Source: Bloomberg

Policy Issues:

• Monetary:
• Jerome Powell – Confirmed in January;
• 1st Congressional Testimony (02/27-02/28)
• Issue: Will Powell continue the Yellen approach
• f slow and steady rate adjustments?
• “I Like Our Current Plan.”
• Fiscal:
• Tax Reform – Finalized in Late December;
• Issue: Does the economy need a booster shot?
• Still Open for Debate.

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Strategic Considerations

Interest Rate Increases: Current Target Range is 1.25 – 1.50%; 2018: At Least 2 increases with a high probability of 3; 2019: Likely 3 – 4 increases; and Expected Level (2020): 2.75%

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Strategic Considerations

Government Policy Issues:

• Federal Reserve’s Balance Sheet - $4.5 Trillion:

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Strategic Considerations

Portfolio Issues:

• Pool Liquidity Requirements:
• Property Taxes – Prepayments in December; and
• New GO Bond Issuance (approx. $630 Million) over

remainder of Fiscal 2018

• Use Money Market Sector to Satisfy Liquidity Needs
• Extending Portfolio Duration: 1.09
• 0.95 in December 2017;
• 0.88 in August 2017 and
• 0.68 in December 2016

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Strategic Considerations

Portfolio Issues:

• Credit Committee:
• January 2018: Completed review of all existing companies

authorized for purchase in the Pool;

• February 2018: Received Credit Committee approval to add

three new names (Dexia, Natixis and Norinchukin) to the approved list.

• Pool Participant Meetings:
• Are meeting with Pool Participants to discuss Cash Flow needs –

with a focus on Capital Spending projections;

• Recent meetings have included Airport, PUC and Unified School

District, which represent roughly 30% of Pool assets; and

• MTA (12%) is scheduled for early March

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Strategic Considerations

Historical Maturity Distribution Comparison

11 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

1/31/2017 1/31/2018 0% 5% 10% 15% 20% 25% 30% 35% 40% 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

1/31/2017 1/31/2018

Source: SunGard APS2

9.4% 6.8% 21.2% 8.1% 71.9% 56.5% 48.7% 49.6% 2.9% 2.9% 3.6% 1.7% 6.6% 14.8% 10.0% 20.4% 1.6% 6.1% 8.5% 9.2% 7.3% 9.4% 1.3% 0.9% 0.4% 2.5% 5.7% 3.9%

1.0% 1.0% 6.3%

• 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

01/31/2015 01/31/2016 01/31/2017 01/31/2018

$ Millions

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

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Portfolio Comparison

Source: SunGard APS2

Portfolio Comparison

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FIXED 60% FLOAT 33% STEP CPN 7%

1/31/2017

FIXED 70% FLOAT 26% STEP CPN 4%

1/31/2018

Source: SunGard APS2

Name of Fund Portfolio Size* ($ mns)

Los Angeles County $31,920.0 LAIF 22,124.3 San Diego County 10,165.2 City and County of San Francisco 9,557.2 Riverside County 7,103.6 Orange County (ex. Schools) 4,674.7 Sacramento County 3,887.1 Fresno County 3,404.8 Contra Costa County 2,980.8 Sonoma County 2,283.3

LGIP Index 30-Day Gross Yield January 2012 – January 2018

County Pooled Fund Statistics

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Sources: Bloomberg, Sacramento County as of 02/02/2018

* as of Jan 2018 Contra Costa County Fresno County LAIF Los Angeles County Orange County Riverside County City and County of San Francisco Sacramento San Diego County Sonoma County 0.9% 1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7% 1.8% 1.9% 2.0% 2.1% 2.2% 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 Monthly Change In Earned Income Yield

Weighted Average Maturity (in days)

Sept 2017 Jan 2018

0.0% 0.5% 1.0% 1.5% 2.0% Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 San Francisco Earned Income Yield LGIP Index 30-Day Gross Yield

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Pool Participants Breakdown

As of January 31, 2018

Source: Best Available Data. Total based on APS2 Pooled Fund Book Balance as of 01/31/2018. Participants Balances are estimates.

Pool Participant Fund Balance Percent of Fund

General Fund/Special City Funds/Internal Services Funds $3,713,938,334 38.98% San Francisco Municipal Transportation Authority 1,117,414,527 11.73% San Francisco International Airport 1,067,412,669 11.20% San Francisco Public Utilities Commission 1,045,187,609 10.97% San Francisco Unified School District 768,199,152 8.06% Facilities and Capital Projects Funds - General 616,007,161 6.47% San Francisco General Hospital and Laguna Honda Hospital 296,811,024 3.12% OCII - Successor Agency – former SFRDA 265,087,226 2.78% Other agencies (incl. Transbay Joint Powers, Trial Courts) 206,883,635 2.17% Port of San Francisco 200,066,002 2.10% San Francisco Community College District 174,688,177 1.83% San Francisco County Transportation Authority 39,791,795 0.42% Pension and Retiree Health Care Trust Fund 15,512,084 0.16%

Totals

$9,526,999,394 100.0%

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Source: Cognos Impromptu

1 2 3 4 5 6 7 8 9 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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

June 30, 2005 - June 30, 2017

Pool Participants Trends

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Appendix

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