Loading...
HomeMy WebLinkAbout6-1-2021 Council Presentation - Marana_1Q21_Council Report_FINAL© PFM 0© PFM 0© PFM 0 Town of Marana Investment Portfolio Summary Quarter Ending March 31, 2021 PFM Asset Management LLC 1820 East Ray Road Chandler, AZ 85225 855-885-9621 pfm.com Luke Schneider, CFA, Director Annette Gaston, Senior Managing Consultant © PFM 1© PFM 1© PFM 1 AA+ 58% AAAm 39%AA 1% AA- 2% Credit Quality (S&P Ratings) Executive Summary1,2 Account Summary Beginning Values as of 3/31/21 Ending Values as of 12/31/20 Market Value $48,235,399 $43,262,962 Book Value $48,039,242 $42,940,296 Unrealized Gain/(Loss)$196,157 $322,666 Weighted Average YTM at Market 0.18%0.13% Weighted Average YTM at Cost 0.73%0.91% Maturity Distribution Town of Marana as of 3/31/21 1.Market Value and Book Value include $18,579,120 invested with the State Local Government Investment Pools 5 & 7 as of 3/31/2021. 2.Weighted average maturity includes LGIP balances and uses book values for weighting. Accrued interest and cash balances are excluded. 43.9% 8.8% 19.7%19.6% 4.2%0.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% $0 $5 $10 $15 $20 $25 $30 Millions3.8% Weighted Average Maturity: 446 days U.S. Treasury 19% Federal Agency 38% Corporate 4% LGIP 39% Sector Distribution © PFM 2© PFM 2© PFM 2 Security Type and Issuer Compliance1,2,3 Security Type Book Value % of Portfolio Permitted by Policy Compliance U.S. Treasury $9,224,923 19.2%100.0% Federal Agency $18,154,069 37.8%100.0% Corporates $2,081,131 4.3%40.0% AZ LGIP $18,579,120 38.7%100.0% Total Book Value $48,039,242 100.0% Maturity Book Value % of Portfolio Permitted by Policy Compliance 0-6 Months $21,068,501 43.9%No Limit  6-12 Months $4,251,096 8.8%No Limit  1-2 Years $9,474,375 19.7%No Limit  2-3 Years $9,409,563 19.6%No Limit  3-4 Years $1,841,258 3.8%No Limit  4-5 Years $1,994,450 4.2%No Limit  Over 5 Years $0 0.0%0% Total Book Value $48,039,242 100.0% Accrual Basis Earnings 1/1/21 through 3/31/21 Estimated Earnings $89,521 Total Estimated Earnings $89,521 1.Investment policy dated February 2020. 2.Maturity distribution does not include accrued interest. 3.Accrual basis earnings does not include LGIP balances. Issuer Book Value % of Portfolio Permitted by Policy Compliance FNMA $9,212,150 13.9%100% FHLB $4,788,769 9.9%100% FHLMC $6,711,274 13.9%100% U.S. Treasury $9,224,923 19.2%100% Apple Inc $521,808 1.1%5% Blackrock Inc $518,688 1.1%5% Visa $519,129 1.1%5% Wal-Mart Stores Inc $521,506 1.1%5% AZ LGIP $18,579,120 38.7%100% Total Book Value $48,039,242 100.0% Town of Marana as of 3/31/21 © PFM 3© PFM 3© PFM 3 Economic Update Current Market Themes Economic conditions during the first quarter were characterized by: −A dramatically lower COVID-19 caseload as vaccine inoculations ramped up despite initial logistical challenges −A new administration in Washington pushing new policies and priorities −Improving economic data supported by additional $1.9 trillion in relief funds from the American Rescue Plan Act −Increasing inflation expectations fueled by a combination of stronger recovery and additional stimulus −A surge in long-term Treasury yields to pre-pandemic levels −A reaffirmed commitment by the Federal Reserve to keep short-term rates near-zero rates and their asset purchase program in place until the economy is more fully recovered Hiring accelerated during Q1 as lockdown restrictions eased. The U.S. economy added 916,000 jobs in March with gains across most industries. Unemployment consequently fell with the unemployment rate ending the quarter at 6.0%. Portfolio Strategy −Diversification will remain a key element of our strategy, with allocations dependent upon our assessment of changing relative value. −Given the substantial increase in long-term yields that has already occurred, we have reduced our defensive duration position somewhat, though our view is that rates will remain anchored by the Fed’s near-zero rate policy for the foreseeable future. −The federal agency sector offered record-low yield spreads, especially on maturities inside of five years. −Investment-grade corporates eked out muted excess returns as higher income offset modestly wider yield spreads. Supply was strong and rising rates put natural upward pressure on yield spreads. −The vaccine rollout, accommodative monetary policy, and the new $1.9 trillion stimulus package all point to continued improvement in U.S. economic fundamentals. As a result, increasing optimism and inflation expectations, particularly in the near term, is likely to put upward pressure on longer term rates. Town of Marana as of 3/31/21 © PFM 4© PFM 4© PFM 4 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20Jan-21Feb-21Mar-212-Year Treasury Yields 1.45% 0.25% 0.15%0.13%0.12% Source: Bloomberg, as of 3/31/2021. The U.S. Treasury yield curve steepened dramatically during the quarter. Yields on short-term maturities under a year remained anchored by the Fed’s near-zero rate policy. Yields on 2-to 3-year maturities hovered near record lows, while yields on maturities five years and longer increased by 50 to 90 basis points (0.50% to 0.90%). This pushed spreads between the 10- year and 2-year Treasuries to a five-year high of 158 basis points (1.58%) by quarter end. The 2-year Treasury increased modestly by 4 basis points (0.04%) since December 31, 2021, to end the quarter at 0.16%. Treasury Yields Remain Anchored to Near-Zero Rates Town of Marana as of 3/31/21 0.16% © PFM 5© PFM 5© PFM 5 Disclosures PFM is the marketing name for a group of affiliated companies providing a range of services. Investment advisory services areprovided by PFM Asset Management LLC which is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Additional applicable regulatory information is available upon request. The views expressed within this material constitute the perspective and judgment of PFM Asset Management LLC at the time of distribution and are subject to change. Any forecast, projection, or prediction of the market, the economy, economic trends, andequity or fixed-income markets are based upon current opinion as of the date of issue, and are also subject to change. Opinions and data presented are not necessarily indicative of future events or expected performance. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable. No representation is made as to its accuracy or completeness. This material is intended for informational purposes only and should not be relied upon to make an investment decision, as it was prepared without regard to any specific objectives or financial circumstances. It should not be construed as an offer to purchase/sell any investment. References to particular issuers are for illustrative purposes only, and are not intended to be recommendations or advice regarding such issuers. It is not possible to invest directly in an index. The index returns shown throughout this material do not represent the results of actual trading of investor assets. Third-party providers maintain the indices shown and calculate the index levels and performance shown or discussed. Index returns do not reflect payment of any sales charges or fees an investor would pay to purchase the securities they represent. The imposition of these fees and charges would cause investment performance to be lower than the performance shown. PFM Asset Management LLC has exercised reasonable professional care in the preparation of this performance report. However, information in this report on market indices and security characteristics, as well as information incorporated in the Market Commentary section, is received from sources external to PFM Asset Management LLC. PFM Asset Management LLC relies on the client's custodian for security holdings and market values. Transaction dates reported bythe custodian may differ from money manager statements. While efforts are made to ensure the data contained herein is accurate and complete, we disclaim all responsibility for any errors that may occur. For more information regarding PFM’s services or entities, please visit www.pfm.com. © 2019 PFM Asset Management LLC. Further distribution is not permitted without prior written consent.