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<br />!. f"'". 1 <br /> <br />CITY OF SAN LEANDRO <br /> <br />MEMORANDUM <br /> <br />DATE: <br />TO: <br />FROM: <br />SUBJECT: <br /> <br />April 25, 2007 <br /> <br />Finance Committee <br /> <br />Jesse Baloca, Finance Dir~ <br />Investment Report - Quarter Ended March 31, 2007 <br /> <br />RECOMMENDATION <br />Staff recommends Finance Committee acceptance of the attached investment report for the <br />quarter ended March 31, 2007. <br /> <br />OVERVIEW <br />On March 31,2007 the City's investment portfolio had a market value of$83.9 million, which is <br />an increase of $3.1 million from Dece~ber 31, 2006. The City's investments in LAIF have <br />increased from 42% to 49% of the City's total investments, allowing for a greater return on <br />investment. LAIF' s quarterly apportionment rate as of March 31, 2007 was 5.17%, an increase <br />of 5.11 % on December 31, 2006. The investment portfolio managed by Chandler had a March <br />31, 2007 average book yield of 4.22%, an increase from .15% on December 31, 2006. <br /> <br />The average maturity of the Chandler portfolio for the March 31, 2007 remains under 2 years and <br />is performance measured against 1-3 year government securities benchmark. As of April 24, <br />2007, the 5-year Treasury rate of 4.51 % is still lower than the 6-month Treasury rate of 5.03%. <br />As a result of the inverted yield and the Fed's ongoing pause in regards to an increase on interest <br />rates, the City will continue with its current barbell strategy of purchasing short-term investments <br />(under I-year) in an effort to maintain liquidity and gain a higher yield while optioning to also <br />purchase long-term (up to 5 years) to ensure security with the portfolio and current interest rate <br />environment. <br /> <br />Since inception (May 2004), Chandlers' performance gain to the City, less the fees paid for <br />portfolio management services, remains 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 March 31, 2007 LAIF <br />yield of 5 .17% continues to exceed the portfolio with Chandler of 4.22% resulting in a loss when <br />compared to Chandler. In response, the City will continue to withdraw from the Chandler <br />portfolio as investments mature and re-evaluate its reinvestment into either LAIF, Chandler Asset <br />Management or with other investment managers with the intent of increasing yield opportunities <br />and lower cost. <br /> <br />E: \Investments\InvestmentReport3-31-07.doc <br />