Presentation to the City of Los Angeles Treasurer on the City's - PowerPoint PPT Presentation

Presentation to the City of Los Angeles Treasurer on the City's General Pool Investments July 31, 2018

July 31, 2018 Data Source: Bloomberg Economic Update: Overall Economy * Real Rate (Inflation Adjusted) Percent -3 -2 -1 0 1 2 3 4 5 6 Q4 2010 2.0 Q1 2011 -1.0 Q2 2011 2.9 Q3 2011 -0.1 U.S. GDP (Quarter over Quarter Annualized)* Q4 2011 4.7 Q1 2012 3.2 Q2 2012 1.7 Q3 2012 0.5 Q4 2012 0.5 Q1 2013 3.6 Q2 2013 0.5 Q3 2013 3.2 Q4 2013 3.2 Q1 2014 -1.0 Q2 2014 5.1 Q3 2014 4.9 Q4 2014 1.9 Q1 2015 3.3 Q2 2015 3.3 Q3 2015 1.0 Q4 2015 0.4 Q1 2016 1.5 Q2 2016 2.3 Q3 2016 1.9 Q4 2016 1.8 Q1 2017 1.8 Q2 2017 3.0 Q3 2017 2.8 Q4 2017 2.3 Q1 2018 2.2 Estimate: Bloomberg's Survey of Economists Q2 2018 4.1 Q3 2018 2.8 Q4 2018 2.7 Q1 2019 2.3 As of: 7/31/2018 Q2 2019 2.3 2

Economic Update: Employment Unemployment Rates Monthly Non-Farm Payrolls California 9 400 LA Area U.S.A 350 8 300 7 250 Thousands Percent 200 6 150 5 100 4 50 0 3 Apr-14 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jan-14 Oct-14 Jan-15 Apr-15 Oct-15 Jan-16 Apr-16 Oct-16 Jan-17 Apr-17 Oct-17 Jan-18 Apr-18 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 *Los Angeles area unemployment is not seasonally adjusted. 12 Month Average Monthly Job Change: 200,000 Data Source: Bloomberg July 31, 2018 3

Economic Update: Consumer Activity U.S. Retail Sales* YOY % Change Total Monthly U.S. Retail Sales $520 4.5 4 $500 3.5 $480 3 Percent 2.5 Billions $460 2 1.5 $440 1 $420 0.5 0 $400 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 *Inflation Adjusted Data Source: Bloomberg July 31, 2018 4

Economic Update: Inflation Sector YOY % Price Changes CPI and CPIX* YOY % Change 3.5 12.4 Energy 3.0 3.5 Shelter 2.5 2.9 CPI 2.0 2.8 Services Percent 2.7 1.5 Wages 2.3 1.0 Education 1.4 Food 0.5 CPI CPIX 0.4 Apparel 0.0 0.0 Communication -0.5 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 0 3 6 9 12 Percent *CPIX: Consumer Price Index, excluding food and energy Data Source: Bloomberg July 31, 2018 5

Economic Update: Dollar and Commodities Gold and Oil Dollar Index 106 $2,000 $120 104 Gold $110 102 $1,800 100 Oil $100 98 96 $1,600 $90 94 Gold-Per Ounce Oil-Per Barrel 92 $80 Index Value $1,400 90 88 $70 86 $1,200 $60 84 82 $50 $1,000 80 78 $40 76 $800 74 $30 72 70 $600 $20 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Data Source: Bloomberg July 31, 2018 6

Economic Update: Sector Returns YTD 7/31/18 As of: 14 11.5 12 10.5 10.2 10 8 7.2 6.3 6 Percent 4 2.0 2 1.1 0.8 0.6 0.2 0 0.0 -0.4 -0.6 -2 -1.5 -1.7 -2.6 -2.7 -2.9 -4 -3.6 -4.2 -4.4 -6 Data Source: Bloomberg July 31, 2018 7

Economic Update: S&P 500 Returns 7/31/18 As of: YTD S&P 500 Major Sector Returns 16 13.4 14 11.6 12 10 8.3 8.2 8 5.6 Percent 6 4 2.5 1.9 2 0.9 0 -0.5 -2 -4 -4.6 -6 Data Source: Bloomberg July 31, 2018 8

Economic Update: Yield Curve FYTD U.S. Treasury Yield Curve 3.3 Maturity 6/29/18 7/31/18 Change 3.1 3M 1.92 2.02 0.11 2.9 6M 2.11 2.19 0.09 2.7 1Y 2.31 2.41 0.10 Percent 2Y 2.53 2.67 0.14 2.5 3Y 2.62 2.77 0.15 2.3 6/29/18 5Y 2.74 2.85 0.11 2.1 7/31/18 10Y 2.86 2.96 0.10 1.9 30Y 2.99 3.08 0.09 1.7 3M6M 1Y 2Y 3Y 5Y 10Y 30Y Data Source: Bloomberg Figures may not total due to rounding July 31, 2018 9

Economic Update: Interest Rates U.S. Treasury Yields: 2Y and 5Y U.S. Treasury Yields: 3M and 1Y 3.00 1Y 3.25 3.00 3M 2.50 2.75 2.50 2.00 2.25 2.00 1.50 Percent Percent 1.75 1.50 1.00 1.25 1.00 0.50 0.75 5Y 0.50 0.00 2Y 0.25 -0.50 0.00 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Mar-16 Mar-17 Mar-18 Jul-15 Sep-15 Nov-15 Jan-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 May-18 Jul-18 Data Source: Bloomberg July 31, 2018 10

Economic Update: Agency and Corporate Spreads Spread*: 1-5 Yr Corporate vs Treasury Spread*: 1-5 Yr Agency vs Treasury 30 225 200 25 175 20 Basis Point Spread Basis Point Spread 150 15 125 100 10 8 60 75 5 50 25 0 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 *BofA/Merrill Index (option adjusted spread vs. Treasury) *BofA/Merrill Index (option adjusted spread vs. Treasury) Agency (GVP0) Corporate A-AAA (CV10) Data Source: Bloomberg July 31, 2018 11

Summary Portfolio Characteristics Core Los Angeles Reserve Total General Los Angeles Core Benchmark * Reserve Benchmark # Portfolio Market Value $2,436,708,887 -- $6,713,591,769 -- $9,150,300,657 Book Value $2,444,009,712 -- $6,871,390,434 -- $9,315,400,145 Variance ($7,300,824) -- ($157,798,664) -- ($165,099,489) Mkt Value % of Total 26.6% -- 73.4% -- 100% Average Maturity (Yrs)** 0.36 0.23 2.77 2.75 2.13 Effective Duration** 0.35 0.23 2.62 2.61 2.01 Weighted Purchase Yield## 1.69% -- 1.88% -- 1.83% *Core Benchmark: 3 Month T-Bill (G0O1 ICE BofAML Index) #Reserve Benchmark: 1-5 Year Govt/Corp A-AAA (BU10 ICE BofAML Index) **Average Maturity after rebalancing for the indexes--Portfolios based upon trade date holdings, Core Average Maturity includes checking ## Weighted Purchase Yield for Core does not include checking July 31, 2018 12

Total General Portfolio: Maturity Distribution 30% 25% 20% 7/31/18 15% 6/30/18 10% 5% 0% 0-.25 .25 to .5 .5 to 1 1 to 2 2 to 3 3 to 4 4 to 5+ Years 0-.25 .25 to .5 .5 to 1 1 to 2 2 to 3 3 to 4 4 to 5+ 7/31/18 13.6% 3.0% 10.1% 24.8% 19.8% 16.4% 12.4% 6/30/18 12.3% 2.6% 10.0% 24.8% 20.8% 17.3% 12.2% Variance 1.2% 0.4% 0.1% 0.0% -1.1% -0.9% 0.1% July 31, 2018 13

July 31, 2018 *Calculated using par values, includes checking Total General Portfolio: Maturity Distribution by Month Millions 1,000 1,200 200 400 600 800 0 Aug-18 989 Sep-18 213 Oct-18 40 Nov-18 87 Dec-18 105 Jan-19 85 Feb-19 190 Mar-19 170 Apr-19 105 May-19 165 Jun-19 185 Jul-19 110 Aug-19 202 Sep-19 170 Oct-19 202 Nov-19 160 Dec-19 169 Combined Maturity Distribution* Jan-20 180 Feb-20 150 Mar-20 245 Apr-20 135 May-20 186 Jun-20 321 Jul-20 185 Aug-20 140 Sep-20 150 Oct-20 115 Month Nov-20 157 Dec-20 140 Jan-21 170 Feb-21 270 Mar-21 120 Apr-21 170 May-21 151 Jun-21 142 Jul-21 125 Aug-21 170 Sep-21 55 Oct-21 110 Nov-21 200 Dec-21 72 Jan-22 192 Feb-22 165 Mar-22 100 Apr-22 170 May-22 160 Jun-22 86 Jul-22 70 Aug-22 60 Sep-22 25 Oct-22 75 Nov-22 105 Dec-22 60 Jan-23 105 Feb-23 175 Mar-23 85 Apr-23 165 May-23 120 Jun-23 70 Jul-23 95 Aug-23 10 14

Sector Allocations: Total General Portfolio July 31, 2018 Sector 7/31/2018 6/30/2018 Variance Bank Dep 1.3% Bank Deposits 1.3% 1.2% 0.1% CDARS 0.0% 0.0% 0.0% CP 6.4% Commercial Paper 6.4% 7.1% -0.7% CORP Corporate Notes 16.1% 15.9% 0.2% 16.1% MMF ABS 1.2% 1.3% 0.0% 1.4% MMFs 1.4% 1.3% 0.1% ABS Tsy 1.2% Agy 62.2% Negotiable CDs 0.0% 0.0% 0.0% 11.2% Agencies* 11.2% 10.1% 1.2% Treasuries 62.2% 63.2% -0.9% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding July 31, 2018 15

Sector Allocations: Core Portfolio Core Portfolio July 31, 2018 Sector 7/31/2018 6/30/2018 Variance Bank Deposits 5.0% 4.8% 0.2% CDARS 0.0% 0.0% 0.0% Bank Dep Commercial Paper 24.2% 28.7% -4.5% Tsy 5.0% 38.8% Corporate Notes 8.9% 8.8% 0.1% MMFs 5.4% 5.2% 0.2% Negotiable CDs 0.0% 0.0% 0.0% CP Agy 24.2% Agencies* 17.7% 13.7% 4.0% 17.7% Treasuries 38.8% 38.8% 0.0% Corp 8.9% Total 100.0% 100.0% MMF 5.4% *Includes Supranational and Municipal Securities Figures may not total due to rounding July 31, 2018 16