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Roseville Finance Commission Agenda Item Page 1 of 2 Memo To: Roseville Finance Commission From: Chris Miller, Finance Director Date: March 14, 2017 Re: Item #5: Review 2016 Investment Portfolio Performance Background The City’s Investment 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 over the long term. The following table depicts the City’s investment portfolio performance over the past four years: City of Roseville Investment Portfolio Performance Average Var. + / -Var. + / - Portfolio Portfolio 10-Year 10-Year 5-Year 5-Year Year Earnings Term (yrs.)Treasury Treasury Treasury Treasury 2013 3.30%12.4 3.00%0.30%1.74%1.56% 2014 3.43%11.0 2.11%1.32%1.61%1.81% 2015 2.88%9.8 2.27%0.61%1.76%1.12% 2016 2.61%9.8 2.45%0.17%1.93%0.68% 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 9.8 years earning 2.60%. This is 0.17% (17 basis points) higher than the 10-year portfolio target. As a reminder, this represents a snapshot-in-time comparison as measured on 12/31/16. Just three months earlier, the portfolio earnings rate was 2.60% while the 10-year treasury was at 1.83% for a variance of +0.78% compared to +0.17% on December 31st. As noted in the table, the City’s investment portfolio performance relative to the portfolio’s benchmark can vary widely from year to year in conjunction with changing economic factors including interest rate changes. As noted earlier, the portfolio performance is, and will continue to be, constrained by the limitations noted above.