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Roseville Finance Commission Agenda Item Page 1 of 2 Memo To: Roseville Finance Commission From: Chris Miller, Finance Director Date: October 11, 2016 Re: Item #6: Review Investment Policy & Consider Performance Benchmarking Background At the September 13, 2016 Finance Commission meeting, the Commission asked to review the City’s Investment Policy and consider whether to establish performance benchmarking and reporting. The Investment Policy was reviewed by the Finance Commission and City Council in 2015, although the review was fairly cursory and some of the remaining language could be updated. A copy of the Policy is included in Attachment A. The current Policy is rooted in industry best practices and has been modified to accommodate the limited resources available to manage the City’s investment portfolio. This limitation necessitates the use of relatively simple investment strategies that require only a nominal amount of time. These limitations, accompanied by statutory restrictions on the types of investments we can participate in, will constrain the portfolio’s investment performance. As a result, the Policy calls for the portfolio’s investment performance to equate to, at a minimum, the U.S. Government Bond (Treasuries) Yield for the comparable investment period. In other words, if our general investment horizon is five years, then our portfolio yield should be equal to or greater than the five-year Treasury rate. The following table depicts the City’s investment portfolio performance over the past four years: City of Roseville Investment Portfolio Performance Average Var. + / - Portfolio Portfolio 10-Year 10-Year Year Earnings Term (yrs.)Treasury Treasury 2013 3.30%12.4 3.00%0.30% 2014 3.43%11.0 2.11%1.32% 2015 2.88%9.8 2.27%0.61% 2016 (as of 8/31/16)2.60%9.8 1.58%1.02% Note: As measured on December 31st Currently, the City’s current investment portfolio (excluding monies set aside for short-term cash flow needs) has an average term of 9.3 years earning 2.60%. This is 1.02% (102 basis points) higher than the 10-year portfolio target.