February 28, 2020 City Hall - Room 140 1 Dr. Carlton B. Goodlett - PowerPoint PPT Presentation

Office of the Treasurer & Tax Collector City and County of San Francisco José Cisneros,Treasurer Tajel Shah, Chief Assistant Treasurer Robert L. Shaw, CFA, Chief Investment Officer February 28, 2020 City Hall - Room 140 ● 1 Dr. Carlton B. Goodlett Place ● San Francisco, CA 94102-4638 Telephone: 415-554-5210 ● Facsimile: 415-554-5660

Economic & Market Overview 3-5 Strategy 6-8 The Economic Outlook 9-13 Pooled Fund Review 14-17 Pool Participants Breakdown 18-19 Appendix A 20 January Monthly Report 2020 Separate handout 2

Producer Price Index vs Consumer Price Index Gross Domestic Product 4% 62 3.5% 59 3% 2.5% 56 53 2% 1.5% 50 1% 0.5% 47 44 0% -0.5% GDP Year-over-Year Change ISM Manufacturing PMI 41 Core CPI Core PPI CPI PPI ISM Non-Manufacturing PMI -1.5% -1% 38 12/15 12/16 12/17 12/18 12/19 12/15 12/16 12/17 12/18 12/19 Employment JOLTS & Jobless Claims 12% 600K 9,000K Wage Growth 66% 8,000K Wage Growth & Unemployment Rate Labor Participation Rate 10% 500K 7,000K Unemployment Rate Labor Participation Rate 65% 8% 400K 6,000K 5,000K 6% 300K 64% 4,000K 4% 200K 3,000K 63% 2,000K 2% 100K US Initial Jobless Claims US Job Openings 1,000K 62% 0% 0K 0K 12/09 12/11 12/13 12/15 12/17 12/19 12/09 12/11 12/13 12/15 12/17 12/19 3 Source: Bloomberg

Housing 7 800K Existing Homes Sales New Home Sales Millions 700K 6 600K 5 500K 4 400K Existing Home Sales 3 Growth is Neutral. 300K 2 200K 1 100K 0 0K 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 12/18 12/19 S&P/Case-Shiller Home Price Indices 300 20 Metro Composite San Francisco Area 250 200 150 100 11/09 11/10 11/11 11/12 11/13 11/14 11/15 11/16 11/17 11/18 11/19 4 Source: Bloomberg

2.2% UST Yields 11/8/19 2/7/20 Change 3M 1.54 1.55 0.01 2.1% 6M 1.56 1.56 -0.01 2.0% 1Y 1.57 1.47 -0.10 2Y 1.67 1.40 -0.27 1.9% 3Y 1.70 1.39 -0.31 5Y 1.75 1.41 -0.34 1.8% 1.7% 1.6% 1.5% 1.4% 1.3% 1.2% 3M 1Y 2Y 3Y 5Y UST Yield Curve as of 8/23/2019 UST Yield Curve as of 11/8/2019 UST Yield Curve as of 02/7/2020 5 Source: Bloomberg

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August 2019: Airport ($957 Million); and October 2019: CCSF ($97 Million) 0.74 December 2019: 0.99 December 2018; 0.95 December 2017; Purchasing Securities that mature on (or slightly before) a known need – such as Payroll, Debt Service, Capital Projects, etc.; and Opportunistic Investing. 8

Factor Current Situation Low unemployment rate 3.5% (50 Year Low) – Holding steady Increasing asset prices (stocks, real estate, S&P 500 (+18.3% - since 2009 Trough) etc.); Low Interest rates; Below historical norms & falling Brisk but steady GDP growth; and > 2.3% past several years Low inflation Low (2.5%), but trending upwards Labor participation rate is range bound – despite the large number of job opening; Asset prices (such as US Equities) have been very volatile over the past year; Interest Rates: Shifted quickly from Increases to Decreases – Now in Pause; GDP: The best positive among the factors – but declining; and Average Hourly Earnings remains above 3.0%. 9

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Date of Start of Number of inversion recession months 9/17/1978 1/2/1980 15.5 9/12/1980 7/1/1981 10 8/11/1989 7/1/1990 11 2/2/2000 3/1/2001 13 2/1/2006 12/1/2007 22 8/31/2019 ? ? 11

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Maturity Distribution 50% 40% 30% 12/31/2018 20% 12/31/2019 10% 0% 0 TO 1 MONTHS 1 TO 3 MONTHS 3 TO 6 MONTHS 6 TO 12 MONTHS 12 TO 24 MONTHS 24 TO 36 MONTHS 36 TO 48 MONTHS 48 TO 60 MONTHS Effective Maturity Distribution 50% 40% 30% 12/31/2018 20% 12/31/2019 10% 0% 0 TO 1 MONTHS 1 TO 3 MONTHS 3 TO 6 MONTHS 6 TO 12 MONTHS 12 TO 24 MONTHS 24 TO 36 MONTHS 36 TO 48 MONTHS 48 TO 60 MONTHS 14 Source: SunGard APS2

13,500 $ Millions 12,750 6.2% 12,000 5.6% 11,250 0.2% Supranationals 10,500 8.4% 7.7% Money Market Funds 9,750 4.4% 7.0% 0.9% Medium Term Notes 9,000 3.5% 9.5% 0.6% 21.9% 8,250 Commercial Paper 1.0% 9.6% 5.2% 1.0% 7,500 Negotiable CDs 18.5% 8.8% 0.3% 0.7% 6,750 19.5% Public Time Deposits 10.0% 0.3% 1.3% 6,000 3.6% State/Local Agencies 1.7% 5,250 Federal Agencies 4,500 41.7% U.S. Treasuries 48.0% 3,750 48.4% 52.2% 3,000 2,250 1,500 15.0% 22.4% 750 9.0% 5.9% - 12/31/2016 12/31/2017 12/31/2018 12/31/2019 15 Source: SunGard APS2

STEP CPN 3% FLOAT FLOAT 7% 10% FIXED FIXED 87% 93% December 31, 2018 December 31, 2019 16 Source: SunGard APS2

Name of Fund Portfolio 2.6% Monthly Change in Earned Income Yield Size* ($ mns) Contra Costa Sac Los Angeles County $ 35,695.0 2.4% SF LAIF 26,711.9 2.2% Sonoma City and County of San Francisco 12,325.6 LAIF San Diego County 10,943.4 2.0% SD Fresno County SB 7,839.4 San Bernardino County Orange County Riverside County 7,671.9 1.8% Los Angeles County Riverside Orange County (ex. Schools) 5,625.6 1.6% Fresno 4,179.8 Sacramento County 4,140.2 1.4% 3,386.3 Contra Costa County Jan 3, 2020 Dec 31, 2018 Dec 31, 2019 Sonoma County 2,712.1 1.2% * as of December 2019 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 Weight Average Maturity (in days) 2.5% San Francisco Earned Income Yield 2.0% S&P Rated GIP Index/All (30-Day Gross) 1.5% 1.0% 0.5% 0.0% Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 17 Sources: Bloomberg, Sacramento County as of February 5, 2020

As of December 2019 Pool Participant Fund Balance Percent of Fund General Fund/Special City Funds/Internal Services Funds $ 4,726,940,678 38.3% San Francisco International Airport 2,316,019,942 18.7% San Francisco Public Utilities Commission 1,219,000,237 9.9% Other agencies (incl. Transbay Joint Powers, Trial Courts) 1,168,743,777 9.5% San Francisco Municipal Transportation Authority 793,146,261 6.4% Facilities and Capital Projects Funds - General 632,917,999 5.1% San Francisco Unified School District 387,168,211 3.1% OCII - Successor Agency – former SFRDA 271,270,009 2.2% San Francisco General Hospital and Laguna Honda Hospital 239,975,449 1.9% Pension and Retiree Health Care Trust Fund 218,893,976 1.8% Port of San Francisco 205,752,946 1.7% San Francisco Community College District 93,020,751 0.8% San Francisco County Transportation Authority 79,270,926 0.6% Totals 100.0% $ 12,352,121,161 18 Sources: FSP Impromptu

December 31, 2006 – December 31, 2019 Billions 12 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 General Fund/Special City Funds/Internal Services Funds San Francisco International Airport San Francisco Public Utilities Commission Other San Francisco Municipal Transportation Authority Facilities and Capital Projects Funds - General San Francisco General Hospital and Laguna Honda Hospital San Francisco Unified School District 19 Source: December 2006 – 2019 Ending Balance Cognos and FSP Impromptu.

1. Current Methodology: a) Coupon Income Earned; b) Amortization of Bond Premiums & Discounts; and c) Realized Gains & Losses from sales d) No large period to period changes in Pool Performance – Yield Stability. 2. Book Yield: a) Similar to Earned Income Yield; b) Does not (always) include impact of Realized Gains & Losses 3. Total Return: a) Earned Income Yield + Changes in unrealized Gains & Losses b) Performance can shift significantly from period to period c) Performance can be negative 20