Presentation to the City of Los Angeles Treasurer on the City's General Pool Investments January 31, 2018
January 31, 2018 Data Source: Bloomberg Economic Update: Overall Economy * Real Rate (Inflation Adjusted) Percent -3 -2 -1 0 1 2 3 4 5 6 Q2 2010 3.9 Q3 2010 2.7 Q4 2010 2.5 Q1 2011 -1.5 U.S. GDP (Quarter over Quarter Annualized)* Q2 2011 2.9 Q3 2011 0.8 Q4 2011 4.6 Q1 2012 2.7 Q2 2012 1.9 Q3 2012 0.5 Q4 2012 0.1 Q1 2013 2.8 Q2 2013 0.8 Q3 2013 3.1 Q4 2013 4.0 Q1 2014 -0.9 Q2 2014 4.6 Q3 2014 5.2 Q4 2014 2.0 Q1 2015 3.2 Q2 2015 2.7 Q3 2015 1.6 Q4 2015 0.5 Q1 2016 0.6 Q2 2016 2.2 Q3 2016 2.8 Q4 2016 1.8 Q1 2017 1.2 Q2 2017 3.1 Q3 2017 3.2 Estimate: Bloomberg's Survey of Economists Q4 2017 2.6 Q1 2018 2.7 Q2 2018 2.7 Q3 2018 2.7 As of: 1/31/2018 Q4 2018 2.5 2
Economic Update: Employment Unemployment Rates Monthly Non-Farm Payrolls California 11 400 LA Area 10 U.S.A 350 9 300 250 8 Thousands Percent 200 7 150 6 100 5 50 4 0 3 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Oct-13 Jan-14 Apr-14 Oct-14 Jan-15 Apr-15 Oct-15 Jan-16 Apr-16 Oct-16 Jan-17 Apr-17 Oct-17 Jan-18 Jul-13 Oct-13 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 *Los Angeles area unemployment is not seasonally adjusted. 12 Month Average Monthly Job Change: 176,167 Data Source: Bloomberg January 31, 2018 3
Economic Update: Consumer Activity U.S. Retail Sales* YOY % Change Total Monthly U.S. Retail Sales $500 4.5 $490 4 $480 3.5 $470 3 $460 Percent 2.5 Billions $450 2 $440 1.5 $430 1 $420 0.5 $410 0 $400 Jul-13 Oct-13 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 Jul-13 Oct-13 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 *Inflation Adjusted Data Source: Bloomberg January 31, 2018 4
Economic Update: Inflation Sector YOY % Price Changes CPI and CPIX* YOY % Change 3.0 5.7 Energy 3.1 2.5 Shelter 2.9 Wages 2.0 2.3 Services 1.5 Percent 2.1 CPI 1.0 2.0 Education CPI 0.5 1.6 Food CPIX -0.7 0.0 Apparel -5.7 Communication -0.5 Jul-13 Oct-13 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 -7 -5 -3 -1 1 3 5 7 Percent *CPIX: Consumer Price Index, excluding food and energy Data Source: Bloomberg January 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 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Data Source: Bloomberg January 31, 2018 6
Economic Update: Sector Returns YTD 1/31/18 As of: 10 8.8 8.6 8 6.9 5.7 5.6 6 5.2 4.5 4.4 3.8 3.8 4 2.5 2.2 Percent 2 1.2 0.1 0 -0.2 -0.3 -0.9 -1.1 -2 -2.2 -3.3 -4 -4.3 -6 Data Source: Bloomberg January 31, 2018 7
Economic Update: S&P 500 Returns 1/31/18 As of: YTD S&P 500 Major Sector Returns 10 9.2 8 7.0 6.6 6.6 6 5.4 4.0 3.6 4 Percent 2.6 1.6 2 0 -2 -3.1 -4 Data Source: Bloomberg January 31, 2018 8
Economic Update: Yield Curve FYTD U.S. Treasury Yield Curve 3.1 Maturity 6/30/17 1/31/18 Change 2.9 3M 1.01 1.46 0.45 2.7 6M 1.13 1.65 0.52 2.5 2.3 1Y 1.23 1.89 0.66 Percent 2.1 2Y 1.38 2.14 0.76 1.9 3Y 1.55 2.29 0.74 1.7 6/30/17 5Y 1.89 2.52 0.63 1.5 1.3 1/31/18 10Y 2.31 2.71 0.40 1.1 30Y 2.84 2.94 0.10 0.9 3M6M 1Y 2Y 3Y 5Y 10Y 30Y Data Source: Bloomberg Figures may not total due to rounding January 31, 2018 9
Economic Update: Interest Rates U.S. Treasury Yields: 2Y and 5Y U.S. Treasury Yields: 3M and 1Y 2.00 1Y 2.75 1.80 2.50 3M 1.60 2.25 1.40 2.00 1.20 1.75 Percent Percent 1.00 1.50 0.80 1.25 0.60 1.00 0.40 0.75 0.20 0.50 5Y 0.00 0.25 2Y -0.20 0.00 Jan-15 Mar-15 May-15 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-15 Mar-16 Mar-17 Jan-15 May-15 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 Data Source: Bloomberg January 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 75 8 5 50 45 25 0 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 *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 January 31, 2018 11
Summary Portfolio Characteristics Core Los Angeles Reserve Total General Los Angeles Core Benchmark * Reserve Benchmark # Portfolio Market Value $2,368,919,991 -- $6,861,684,748 -- $9,230,604,739 Book Value $2,367,701,031 -- $6,984,160,373 -- $9,351,861,404 Variance $1,218,960 -- ($122,475,625) -- ($121,256,665) Mkt Value % of Total 25.7% -- 74.3% -- 100% Average Maturity (Yrs)** 0.21 0.24 2.75 2.75 2.10 Effective Duration** 0.19 0.23 2.63 2.62 2.01 Weighted Purchase Yield## 1.58% -- 1.68% -- 1.66% *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 January 31, 2018 12
Total General Portfolio: Maturity Distribution 25% 20% 15% 1/31/18 12/31/17 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+ 1/31/18 21.3% 0.8% 3.6% 23.6% 21.5% 16.8% 12.4% 12/31/17 22.7% 0.9% 2.8% 23.2% 21.1% 15.8% 13.5% Variance -1.4% -0.1% 0.8% 0.4% 0.4% 1.0% -1.1% January 31, 2018 13
Sector Allocations: Total General Portfolio January 31, 2018 Sector 1/31/2018 12/31/2017 Variance Bank Dep 1.1% Bank Deposits 1.1% 0.9% 0.2% CDARS 0.0% 0.0% 0.0% Commercial Paper 19.4% 18.8% 0.6% CP 19.4% Corporate Notes 15.3% 15.1% 0.2% ABS 0.9% 0.9% 0.0% CORP MMFs 0.1% 0.1% 0.0% Tsy 15.3% 55.5% Negotiable CDs 0.0% 0.0% 0.0% Agy MMF Agencies* 7.8% 9.4% -1.6% 7.8% 0.1% Treasuries 55.5% 54.9% 0.7% ABS 0.9% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding January 31, 2018 14
Sector Allocations: Core Portfolio Core Portfolio January 31, 2018 Sector 1/31/2018 12/31/2017 Variance MMF Agy Tsy 7.6% 0.3% 4.7% Bank Deposits 4.1% 3.4% 0.7% Corp Bank Dep 7.9% 4.1% CDARS 0.0% 0.0% 0.0% Commercial Paper 75.5% 71.4% 4.1% Corporate Notes 7.9% 9.1% -1.2% MMFs 0.3% 0.3% 0.0% Negotiable CDs 0.0% 0.0% 0.0% CP 75.5% Agencies* 4.7% 9.3% -4.6% Treasuries 7.6% 6.6% 1.0% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding January 31, 2018 15
Sector Allocations: Purchase Yield vs. Weighted Average Maturity Core Portfolio 1.9% Corp 1.8% 1.7% Sector WAM (Yrs.) Purchase Yield % of Portfolio* CP 1.6% Negotiable CDs 0.00 0.00 0.0% Agy 1.5% Purchase Yield Corporate Notes 0.52 1.75% 8.2% 1.4% Commercial Paper 0.11 1.62% 78.7% 1.3% Money Market 0.00 0.94% 0.3% 1.2% Agencies** 0.53 1.50% 4.9% 1.1% Treasuries 0.89 1.12% 7.9% Tsy 1.0% MMF Total 0.22 1.58% 100.0% Bubble size = Sector's % of Portfolio 0.9% -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 *Based on Market Value WAM Years **Includes Supranational Securities Figures may not total due to rounding Does not include Checking and BNYM Sweep, CDARS included with CP January 31, 2018 16
Sector Allocations: Reserve Portfolio Reserve Portfolio January 31, 2018 Sector 1/31/2018 12/31/2017 Variance ABS Treasuries 72.1% 72.1% 0.0% Corp 1.2% 17.8% Agencies* 8.8% 9.4% -0.6% Corporate Notes 17.8% 17.3% 0.6% Agy 8.8% ABS 1.2% 1.2% 0.0% Tsy Total 100.0% 100.0% 72.1% *Includes Supranational and Municipal Securities Figures may not total due to rounding January 31, 2018 17
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