Presentation to the City of Los Angeles Treasurer on the City's General Pool Investments October 31, 2018
October 31, 2018 Data Source: Bloomberg Economic Update: Overall Economy * Real Rate (Inflation Adjusted) Percent -3 -2 -1 0 1 2 3 4 5 6 Q1 2011 -1.0 Q2 2011 2.9 Q3 2011 -0.1 Q4 2011 4.7 U.S. GDP (Quarter over Quarter Annualized)* 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 Q2 2018 4.2 Estimate: Bloomberg's Survey of Economists Q3 2018 3.5 Q4 2018 2.7 Q1 2019 2.4 Q2 2019 2.4 As of: 10/31/18 Q3 2019 2.2 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 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Apr-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 Oct-18 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 Oct-18 *Los Angeles area unemployment is not seasonally adjusted. 12 Month Average Monthly Job Change: 209,667 Data Source: Bloomberg October 31, 2018 3
Economic Update: Consumer Activity U.S. Retail Sales* YOY % Change Total Monthly U.S. Retail Sales $520 4.50 $510 4.00 $500 3.50 $490 3.00 $480 Percent 2.50 Billions $470 2.00 $460 1.50 $450 1.00 $440 0.50 $430 0.00 $420 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 Oct-18 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 Oct-18 *Inflation Adjusted Data Source: Bloomberg October 31, 2018 4
Economic Update: Inflation Sector YOY % Price Changes CPI and CPIX* YOY % Change 3.5 8.6 Energy 3.0 3.1 Shelter 2.5 3.1 Wages 2.0 2.6 Services Percent 2.5 1.5 Education 2.5 1.0 CPI 1.1 Food 0.5 CPI CPIX -0.1 Apparel 0.0 -0.7 Communication -0.5 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 Oct-18 -2 0 2 4 6 8 10 Percent *CPIX: Consumer Price Index, excluding food and energy Data Source: Bloomberg October 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 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Data Source: Bloomberg October 31, 2018 6
Economic Update: Sector Returns YTD 10/31/18 As of: 10 6.4 5 2.7 1.3 1.1 0.4 0.3 0 -0.7 -1.7 -2.4 -2.5 -2.4 Percent -2.5 -3.1 -5 -5.1 -8.7 -10 -9.0 -10.2 -11.7 -13.1 -15 -15.9 -16.2 -20 Data Source: Bloomberg October 31, 2018 7
Economic Update: S&P 500 Returns 10/31/18 As of: YTD S&P 500 Major Sector Returns 15 9.5 10 8.5 7.7 4.5 4.0 5 Percent 0 -1.3 -5 -4.7 -5.1 -6.5 -10 -11.9 -15 Data Source: Bloomberg October 31, 2018 8
Economic Update: Yield Curve FYTD U.S. Treasury Yield Curve 3.5 Maturity 6/29/18 10/31/18 Change 3.3 3M 1.92 2.33 0.41 3.1 6M 2.11 2.49 0.38 2.9 1Y 2.31 2.66 0.35 2.7 Percent 2Y 2.53 2.87 0.34 2.5 3Y 2.62 2.93 0.30 2.3 6/29/18 5Y 2.74 2.98 0.24 2.1 10/31/18 10Y 2.86 3.14 0.28 1.9 30Y 2.99 3.39 0.40 1.7 3M6M 1Y 2Y 3Y 5Y 10Y 30Y Data Source: Bloomberg Figures may not total due to rounding October 31, 2018 9
Economic Update: Interest Rates U.S. Treasury Yields: 2Y and 5Y U.S. Treasury Yields: 3M and 1Y 3.25 1Y 3.40 3.15 3M 2.75 2.90 2.65 2.25 2.40 2.15 1.75 Percent Percent 1.90 1.25 1.65 1.40 0.75 1.15 5Y 0.90 0.25 2Y 0.65 -0.25 0.40 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Data Source: Bloomberg October 31, 2018 10
Economic Update: Agency and Corporate Spreads Spread*: 1-5 Yr Corporate vs Treasury Spread*: 1-5 Yr Agency vs Treasury 16 175 14 150 12 Basis Point Spread 125 Basis Point Spread 10 8 8 100 6 75 63 4 50 2 25 0 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul-18 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul-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 October 31, 2018 11
Summary Portfolio Characteristics Core Los Angeles Reserve Total General Los Angeles Core Benchmark * Reserve Benchmark # Portfolio Market Value $2,616,020,389 -- $6,618,245,812 -- $9,234,266,201 Book Value $2,626,969,642 -- $6,781,285,693 -- $9,408,255,336 Variance ($10,949,253) -- ($163,039,882) -- ($173,989,135) Mkt Value % of Total 28.3% -- 71.7% -- 100% Average Maturity (Yrs)** 0.36 0.25 2.77 2.74 2.09 Effective Duration** 0.37 0.25 2.63 2.60 1.99 Weighted Purchase Yield## 1.76% -- 1.98% -- 1.92% *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 October 31, 2018 12
Total General Portfolio: Maturity Distribution 30% 25% 20% 10/31/18 15% 9/30/18 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+ 10/31/18 13.6% 5.0% 9.7% 23.3% 19.9% 14.4% 14.1% 9/30/18 12.9% 4.9% 9.5% 24.0% 19.9% 15.0% 13.8% Variance 0.8% 0.1% 0.2% -0.7% 0.0% -0.6% 0.3% October 31, 2018 13
October 31, 2018 *Calculated using par values, includes checking Total General Portfolio: Maturity Distribution by Month Millions 100 200 300 400 500 600 700 800 900 0 Nov-18 820 Dec-18 307 Jan-19 135 Feb-19 190 Mar-19 170 Apr-19 105 May-19 165 Jun-19 185 Jul-19 110 Aug-19 172 Sep-19 135 Oct-19 132 Nov-19 155 Dec-19 169 Jan-20 180 Feb-20 150 Mar-20 245 Combined Maturity Distribution* Apr-20 135 May-20 186 Jun-20 321 Jul-20 185 Aug-20 140 Sep-20 170 Oct-20 150 Nov-20 157 Dec-20 140 Jan-21 170 Month Feb-21 270 Mar-21 120 Apr-21 170 May-21 151 Jun-21 142 Jul-21 125 Aug-21 200 Sep-21 100 Oct-21 140 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 97 Apr-23 165 May-23 120 Jun-23 70 Jul-23 125 Aug-23 160 Sep-23 60 Oct-23 80 Nov-23 0 14
Sector Allocations: Total General Portfolio October 31, 2018 Sector 10/31/18 9/30/18 Variance Bank Dep 0.7% Bank Deposits 0.7% 1.0% -0.2% CDARS 0.0% 0.0% 0.0% CP 8.3% Commercial Paper 8.3% 7.9% 0.5% Corporate Notes 15.9% 15.8% 0.2% CORP 15.9% MMF ABS 1.4% 1.3% 0.1% 0.1% MMFs 0.1% 0.1% 0.0% ABS Agy 1.4% 8.4% Tsy Negotiable CDs 0.0% 0.0% 0.0% 65.2% Agencies* 8.4% 8.8% -0.4% Treasuries 65.2% 65.3% -0.1% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding October 31, 2018 15
Sector Allocations: Core Portfolio Core Portfolio October 31, 2018 Sector 10/31/18 9/30/18 Variance Bank Deposits 2.6% 3.6% -0.9% CDARS 0.0% 0.0% 0.0% Bank Dep 2.6% Commercial Paper 29.4% 28.9% 0.5% Tsy 48.1% Corporate Notes 12.2% 10.8% 1.4% MMFs 0.2% 0.2% 0.0% Negotiable CDs 0.0% 0.0% 0.0% CP 29.4% Agencies* 7.5% 9.0% -1.5% Agy 7.5% Treasuries 48.1% 47.5% 0.6% Corp 12.2% Total 100.0% 100.0% MMF 0.2% *Includes Supranational and Municipal Securities Figures may not total due to rounding October 31, 2018 16
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