investment report
CITY OF ARVADA INVESTMENT REPORT
Investment Portfolio Objectives Pursuant to the City’s investment policy, the primary objectives of the City’s investment activities, in priority order are safety, liquidity and yield. Consistent with this policy, the portfolio of securities is invested in US Treasuries, US Agency debt, local government investment pools (LGIP’s), commercial paper, and corporate debt subject to rating and concentration limits. The City’s investment portfolio is managed to provide sufficient liquidity to meet all reasonably anticipated operating cash needs without selling securities prior to maturity.
Investment Portfolio Performance The portfolio saw a second quarter 2013 yield of .423% which is a decrease of 29bps when compared to the second quarter 2012 yield of .647%. The benchmark yield for the City’s portfolio, as established by the investment policy, is a weighted benchmark of allowable securities. For the second quarter, the weighted benchmark return was .37 percent, constructed using the average 2013 monthly returns. The City’s portfolio yield continued to decline from the previous rolling four quarters, as evidenced by the considerable reduction in investment income and the unfavorable reinvestment environment. One contributing factor to these performance results is that the Fed has left rates at very low levels. The discount rate remains at .25 percent and the Fed has announced that we will continue to experience these rates most likely into 2015. The Federal Reserve will keep rates unchanged until the dynamics of our economy significantly change. The portfolio saw $51 million in investment calls during the first half of the year due to the expiration of call “lockout” periods. These calls have resulted in reinvestment in lower yielding securities which contributes to the reduction in investment income. Balances in LGIP funds have increased due to the anticipated cash outflow of $36 million during third quarter 2013 for the Denver Water Project. Key information regarding the City’s portfolio is shown in the tables and graphs below:
PORTFOLIO PERFORMANCE
PORTFOLIO CHANGES
YTD JUN-13
YTD JUN-12
Difference
06/30/2013
06/30/2012
Difference
Interest Earnings
$553,332
$824,399
-$271,067
Money Market
$5,011,115
$3,001,010
$2,010,104
Portfolio Yield
0.487%
0.706%
-0.219%
Savings/Cash
20,171,595
31,152,850
-10,981,255
Benchmark Yield
0.370%
0.360%
0.010%
CD
19,305,493
19,231,056
74,437
Tracking Error
+12bps
+35ps
-23bps
Corporate
3,000,000
5,000,000
-2,000,000
LGIP
58,070,646
49,425,322
8,645,324
US Agency
111,600,000
101,000,000
10,600,000
2,000,000
7,000,000
-5,000,000
$219,158,848
$215,810,238
$3,348,610
US Treasury Total
26