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<br />CITY OF SAN LEANDRO <br /> <br />MEMORANDUM <br /> <br />DATE: <br />TO: <br />FROM: <br />SUBJECT: <br /> <br />October 20, 2006 <br /> <br />Finance Committee <br />Jesse Baloca, Finance Dire~ <br />Investment Report - Quarter Ended September 30, 2006 <br /> <br />RECOMMENDATION <br />Staff recommends Finance Committee acceptance of the attached investment report for the <br />quarter ended September 30, 2006. <br /> <br />OVERVIEW <br />On September 30, 2006 the City's investment portfolio had a market value of $75.4 million, <br />which is an increase of $2.26 million from June 30, 2006. Currently, the City's LAIF <br />investments account for 38% of the City's total investments. The investment portfolio managed <br />by Chandler had a September 30, 2006 average book yield of 3.90%, a slight increase from <br />3.83% on June 30, 2006. <br /> <br />The average maturity of the Chandler portfolio is 1.5 years as of September 30, 2006 and is <br />performance measured against 1-3 year government securities benchmark. As of October 20, <br />2006 the 2 to 5-year Treasury rate environment (of 4.87% to 4.76%) is lower than the 6-month <br />and I-year Treasury rates of 5.14% and 5.05%, respectively. The inverted yield remains <br />relatively unchanged as the Fed continues with its pause on an interest rate increase. As a result, <br />the City will continue with its strategy to purchase short-term investments (under I-year) in an <br />effort to maintain liquidity and gain a higher yield while optioning to also purchase long-term (up <br />to 5 years) to ensure portfolio security with the current interest rate environment. <br /> <br />Since inception (May 2004), Chandlers' performance gain to the City, less the fees paid for <br />portfolio management services, has become less favorable when compared to LAIF. The <br />performance shortfall primarily reflects (2004) long-term investments that were made under the <br />previous 1 to 5 year performance benchmark when rates were rising. The September 30, 2006 <br />LAIF yield of 4.93% continues to exceed the City's portfolio with Chandler of 3.90% resulting in <br />a loss when compared to Chandler. In response, the City will continue to evaluate upcoming <br />maturities and its reinvestment into either LAIF, Chandler Asset Management, or with other <br />investment managers with the intent of increasing yield opportunities. <br /> <br />E: \Investments\InvestmentReport9-3 0-06 .doc <br />