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

Office of the Treasurer & Tax Collector City and County of San Francisco José Cisneros, Treasurer Tajel Shah, Chief Assistant Treasurer Robert L. Shaw, CFA, Chief Investment Officer Treasury Oversight Committee March 9, 2018 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 3-5 Strategy 6-10 Pooled Fund Review 11-14 Pool Participants Breakdown 15-16 Appendix 17-19 January Monthly Report 2018 Separate handout 2

Key Economic Data Gross Domestic Product Producer Price Index vs Consumer Price Index 3.5% Core CPI Core PPI CPI PPI GDP Year-over-Year Change 5% 61 3.0% ISM Manufacturing PMI 2.5% ISM Non-Manufacturing PMI 59 4% 2.0% 57 1.5% 3% 55 1.0% 0.5% 53 2% 0.0% 51 -0.5% 1% 49 -1.0% -1.5% 0% 47 1/15 1/16 1/17 1/18 12/12 12/13 12/14 12/15 12/16 12/17 Employment JOLTS & Jobless Claims 12% 700K 7,000K Thousands Wage Growth 66% Wage Growth & Unemployment Rate 600K 6,000K Labor Participation Rate 10% Unemployment Rate Labor Participation Rate 500K 5,000K 65% 8% 400K 4,000K 6% 64% 300K 3,000K 4% 200K 2,000K US Initial Jobless Claims 63% 2% 100K 1,000K US Job Openings 0K 0K 62% 0% 12/07 12/09 12/11 12/13 12/15 12/17 1/08 1/10 1/12 1/14 1/16 1/18 3 Source: Bloomberg

Key Economic Data Housing 7 800K Existing Homes Sales New Home Sales Millions 700K 6 600K 5 500K 4 400K 3 300K 2 200K 1 100K 0 0K 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 S&P/Case-Shiller Home Price Indices 300 20 Metro Composite San Francisco Area 250 200 150 100 12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 4 Source: Bloomberg

Yield Curve Changes 3.0% 2.5% 2.0% 1.5% UST Yields 12/29/2017 02/28/2018 Change 3M 1.38 1.65 0.28 1.0% 6M 1.53 1.85 0.32 1Y 1.73 2.06 0.32 2Y 1.88 2.25 0.37 0.5% 3Y 1.97 2.41 0.44 5Y 2.21 2.64 0.43 0.0% 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 5 Source: Bloomberg

Strategic Considerations Policy Issues: • Monetary: • Jerome Powell – Confirmed in January; • 1 st Congressional Testimony (02/27-02/28) • Issue: Will Powell continue the Yellen approach of 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. 6

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% 7

Strategic Considerations Government Policy Issues: Federal Reserve’s Balance Sheet - $4.5 Trillion: • 8

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 • 9

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 • 10

Historical Maturity Distribution Comparison Maturity Distribution 50% 40% 30% 1/31/2017 20% 1/31/2018 10% 0% 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 40% 35% 30% 25% 1/31/2017 20% 15% 1/31/2018 10% 5% 0% 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 11 Source: SunGard APS2

Portfolio Comparison 10,500 $ Millions 9,750 6.3% 9,000 3.9% 0.9% Supranationals 8,250 1.0% 9.2% Money Market Funds 5.7% 1.3% 7,500 1.0% Medium Term Notes 2.5% 8.5% Commercial Paper 9.4% 6,750 20.4% 10.0% Banker's Acceptances 0.4% 6.1% 7.3% 6,000 3.6% 1.6% Negotiable CDs 1.7% 6.6% 14.8% 5,250 Public Time Deposits 2.9% 2.9% State/Local Agencies 4,500 TLGP 3,750 Federal Agencies 48.7% U.S. Treasuries 49.6% 3,000 71.9% 56.5% 2,250 1,500 21.2% 750 8.1% 9.4% 6.8% - 01/31/2015 01/31/2016 01/31/2017 01/31/2018 12 Source: SunGard APS2

Portfolio Comparison 1/31/2017 1/31/2018 STEP STEP CPN CPN 7% 4% FLOAT FLOAT 26% 33% FIXED FIXED 60% 70% 13 Source: SunGard APS2

County Pooled Fund Statistics 2.2% Name of Fund Portfolio Monthly Change In Earned Income Yield 2.1% Size* ($ mns) 2.0% Los Angeles County $31,920.0 1.9% Fresno County LAIF 22,124.3 1.8% City and County of San Diego County 10,165.2 1.7% San Francisco 1.6% San Diego County City and County of San Francisco 9,557.2 1.5% Riverside County 7,103.6 Sacramento 1.4% Los Angeles County Orange County (ex. Schools) 4,674.7 Sonoma County Contra Costa County 1.3% Sacramento County 3,887.1 1.2% Riverside County Fresno County 3,404.8 1.1% Orange County LAIF Contra Costa County 2,980.8 1.0% Sept 2017 Jan 2018 Sonoma County 2,283.3 0.9% 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 * as of Jan 2018 Weighted Average Maturity (in days) LGIP Index 30-Day Gross Yield January 2012 – January 2018 2.0% San Francisco Earned Income Yield LGIP Index 30-Day Gross Yield 1.5% 1.0% 0.5% 0.0% Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 14 Sources: Bloomberg, Sacramento County as of 02/02/2018

Pool Participants Breakdown As of January 31, 2018 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% Source: Best Available Data. Total based on APS2 Pooled Fund Book Balance as of 01/31/2018. 15 Participants Balances are estimates.

Pool Participants Trends June 30, 2005 - June 30, 2017 10 Billions 9 8 7 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 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 16 Source: Cognos Impromptu

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