Presentation to the City of Los Angeles Treasurer on the City's General Pool Investments July 31, 2017
July 31, 2017 Data Source: Bloomberg Economic Update: Overall Economy * Real Rate (Inflation Adjusted) Percent -3 -2 -1 0 1 2 3 4 5 6 Q4 2009 3.9 Q1 2010 1.7 Q2 2010 3.9 Q3 2010 2.7 U.S. GDP (Quarter over Quarter Annualized)* Q4 2010 2.5 Q1 2011 -1.5 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 Estimate: Bloomberg's Survey of Economists Q2 2017 2.6 Q3 2017 2.5 Q4 2017 2.3 Q1 2018 2.2 As of: 7/31/17 Q2 2018 2.3 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 Apr-13 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jan-13 Oct-13 Jan-14 Apr-14 Oct-14 Jan-15 Apr-15 Oct-15 Jan-16 Apr-16 Oct-16 Jan-17 Apr-17 Jan-13 Apr-13 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 *Los Angeles area unemployment is not seasonally adjusted. 12 Month Average Monthly Job Change: 179,833 Data Source: Bloomberg July 31, 2017 3
Economic Update: Consumer Activity U.S. Retail Sales* YOY % Change Total Monthly U.S. Retail Sales $490 4.5 $480 4 $470 3.5 $460 3 Percent 2.5 Billions $450 2 $440 1.5 $430 1 $420 0.5 $410 0 $400 Jan-13 Apr-13 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 Jan-13 Apr-13 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 *Inflation Adjusted Data Source: Bloomberg July 31, 2017 4
Economic Update: Inflation Sector YOY % Price Changes CPI and CPIX* YOY % Change 3.0 3.3 Energy 3.0 2.5 Shelter 2.5 Wages 2.0 2.3 Services 1.5 Percent 2.3 Education 1.0 1.7 CPI CPI 0.5 1.1 Food CPIX -0.7 0.0 Apparel -6.7 Communication -0.5 Jan-13 Apr-13 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 -10 -8 -6 -4 -2 0 2 4 6 Percent *CPIX: Consumer Price Index, excluding food and energy Data Source: Bloomberg July 31, 2017 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-09 Aug-09 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 Feb-09 Aug-09 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 Data Source: Bloomberg July 31, 2017 6
Economic Update: Sector Returns YTD 7/31/17 As of: 30 25 23.7 21.6 21.2 20.2 18.9 20 16.8 15.4 15 11.4 10.9 Percent 10 5.8 5.4 3.8 5 3.2 2.9 2.7 1.4 1.3 1.0 0.6 0.3 0 -4.0 -5 -10 Data Source: Bloomberg July 31, 2017 7
Economic Update: S&P 500 Returns 7/31/17 As of: YTD S&P 500 Major Sector Returns 25 19.1 20 16.8 15 12.9 11.3 10.8 10.8 8.7 10 8.4 Percent 4.3 5 0 -5 -10 -10.4 -15 Data Source: Bloomberg July 31, 2017 8
Economic Update: Yield Curve FYTD U.S. Treasury Yield Curve 3.5 Maturity 6/30/17 7/31/17 Change 3M 1.01 1.08 0.06 6/30/17 3.0 6M 1.13 1.13 0.00 7/31/17 2.5 1Y 1.23 1.22 (0.01) Percent 2Y 1.38 1.35 (0.03) 2.0 3Y 1.55 1.51 (0.04) 1.5 5Y 1.89 1.84 (0.05) 1.0 10Y 2.31 2.30 (0.01) 30Y 2.84 2.90 0.07 0.5 3M6M 1Y 2Y 3Y 5Y 10Y 30Y Data Source: Bloomberg Figures may not total due to rounding July 31, 2017 9
Economic Update: Interest Rates U.S. Treasury Yields: 2Y and 5Y U.S. Treasury Yields: 3M and 1Y 1.40 1Y 2.25 3M 2.00 1.20 1.75 1.00 1.50 0.80 Percent Percent 1.25 0.60 1.00 0.40 0.75 0.20 0.50 5Y 0.00 0.25 2Y -0.20 0.00 Jul-14 Sep-14 Nov-14 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 Mar-15 Mar-16 Mar-17 Jul-14 Sep-14 Nov-14 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 Data Source: Bloomberg July 31, 2017 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 10 75 5 50 55 25 0 Dec-10 Apr-11 Aug-11 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 Dec-10 Apr-11 Aug-11 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 *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, 2017 11
Summary Portfolio Characteristics Core Los Angeles Reserve Total General Los Angeles Core Benchmark * Reserve Benchmark # Portfolio Market Value $1,715,705,678 -- $6,766,042,186 -- $8,481,747,865 Par Value $1,717,976,237 -- $6,751,272,000 -- $8,469,248,237 Variance ($2,270,558) -- $14,770,186 -- $12,499,628 Mkt Value % of Total 20.2% -- 79.8% -- 100% Average Maturity (Yrs)** 0.18 0.24 2.78 2.79 2.25 Effective Duration** 0.19 0.23 2.66 2.67 2.16 Weighted Purchase Yield## 1.25% -- 1.58% -- 1.51% *Core Benchmark: 3 Month T-Bill (G0O1 BofA/Merrill Index) #Reserve Benchmark: 1-5 Year Govt/Corp A-AAA (BU10 BofA Merrill 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, 2017 12
Total General Portfolio: Maturity Distribution 30% 25% 20% 7/31/17 15% 6/30/17 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+ 7/31/17 16.8% 1.0% 2.4% 24.4% 25.4% 16.1% 13.9% 6/30/17 24.8% 0.5% 1.5% 22.4% 22.4% 15.8% 12.5% Variance -8.0% 0.5% 0.9% 2.0% 3.0% 0.3% 1.4% July 31, 2017 13
Sector Allocations: Total General Portfolio July 31, 2017 Sector 7/31/2017 6/30/2017 Variance Bank Dep 1.2% Bank Deposits 1.2% 0.7% 0.4% CDARS 0.0% 0.0% 0.0% CP Commercial Paper 13.2% 12.9% 0.3% 13.2% Corporate Notes 17.0% 15.7% 1.3% CORP ABS 0.8% 0.8% 0.1% 17.0% MMFs 0.1% 2.3% -2.1% Tsy MMF 55.7% Negotiable CDs 0.0% 0.0% 0.0% 0.1% Agy 12.0% ABS Agencies* 12.0% 16.4% -4.3% 0.8% Treasuries 55.7% 51.4% 4.4% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding July 31, 2017 14
Sector Allocations: Core Portfolio Core Portfolio July 31, 2017 Sector 7/31/2017 6/30/2017 Variance Agy 16.9% Bank Deposits 5.7% 2.7% 3.0% Bank Dep MMF 5.7% CDARS 0.0% 0.0% 0.0% 0.7% Corp Commercial Paper 65.0% 47.9% 17.1% 11.7% Corporate Notes 11.7% 7.7% 4.0% MMFs 0.7% 8.4% -7.7% Negotiable CDs 0.0% 0.0% 0.0% Agencies* 16.9% 33.2% -16.3% CP 65.0% Treasuries 0.0% 0.0% 0.0% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding July 31, 2017 15
Sector Allocations: Purchase Yield vs. Weighted Average Maturity Core Portfolio 2.3% Bubble size = Sector's % of Portfolio Corp 1.8% Sector WAM (Yrs.) Purchase Yield % of Portfolio* Negotiable CDs 0.00 0.00 0.0% CP 1.3% Purchase Yield Corporate Notes 0.61 1.61% 12.4% Agy Commercial Paper 0.14 1.25% 69.0% 0.8% Money Market 0.00 0.14% 0.7% Agencies** 0.13 1.04% 17.9% 0.3% MMF Treasuries 0.00 0.00 0.0% Total 0.19 1.25% 100.0% -0.3% -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 July 31, 2017 16
Sector Allocations: Reserve Portfolio Reserve Portfolio July 31, 2017 Sector 7/31/2017 6/30/2017 Variance ABS Treasuries 69.9% 70.2% -0.3% Corp 1.0% 18.3% Agencies* 10.8% 10.2% 0.6% Corporate Notes 18.3% 18.6% -0.3% Agy 10.8% ABS 1.0% 1.0% 0.0% Tsy 69.9% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding July 31, 2017 17
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