1 / 74

Treasury Investment Council October 2018 - March 2019 Overview Meeting Date: May 16, 2019

Treasury Investment Council October 2018 - March 2019 Overview Meeting Date: May 16, 2019. Florida Economy. Florida Economy. Steady recovery continues. November unemployment was 3.3% as compared to the US average of 3.7%.

dalit
Télécharger la présentation

Treasury Investment Council October 2018 - March 2019 Overview Meeting Date: May 16, 2019

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Treasury Investment Council October 2018 - March 2019OverviewMeeting Date: May 16, 2019

  2. Florida Economy

  3. Florida Economy • Steady recovery continues. • November unemployment was 3.3% as compared to the US average of 3.7%. • Florida’s population grew by 1.74% between April 1, 2017 and April 1, 2018. • Florida housing continues to improve: • Documentary Stamp Tax collections saw 3.8% growth in FY 2017-18 over FY 2016-17. • Existing home sales volume in the 2014, 2015, 2016 and 2017 calendar years exceeded the 2005 peak year. This year (2018) is on course to do the same.

  4. State Net Receipts

  5. State Receipts and Disbursements

  6. Treasury Overview

  7. Investment Pool Balance

  8. State Operating Accounts

  9. Non-State Operating Accounts* * Subject to Floor Provision

  10. Bond Accounts

  11. Non-State Operating & Bond Accounts by type Non-State Operating Bond *Miscellaneous includes various associations, foundations, and finance corporations.

  12. Summary of Macro Risks to the Investment Pool

  13. Investment Pool Distributed Income Rate (net)

  14. Investment Pool Distributed Income

  15. Time Deposits Activity • September 2018 balance = $ 1,008,500,000 • October 2018 • Maturities $10 million • Offered $100 million – Minimum bid 3.32% • Awarded $0 • Exceeding bids $0 • November 2018 • Maturities $21.5 million • Offered $100 million – Minimum bid 3.09% • Awarded $20 million • Exceeding bids $0 • December 2018 • Maturities $31 million • Offered $100 million – Minimum bid 2.93% • Awarded $50 million • Exceeding bids $0

  16. Time Deposits Activity • January 2019 • Maturities $17 million • Offered $100 million – Minimum bid 2.92% • Awarded $0 • Exceeding bids $0 • February 2019 • Maturities $16 million • Offered $100 million – Minimum bid 2.92% • Awarded $0 • Exceeding bids $0 • March 2019 • Maturities $0 • Offered $100 million – Minimum bid 2.77% • Awarded $26 million • Exceeding bids $0 • March 2019 balance = $1,009,000,000

  17. Treasury Initiatives

  18. CIP Review - Most Relevant Updates (I) • Added flexibility on U.S. Agencies investments for Internally managed portfolios: • Removed list of permitted U.S. government agency debt. • Added restrictions on subprime Auto ABS for Int. and Long Duration Portfolios: • Bank entity issuer only • Weighted average life less than two years • Minimum per issue size of $500 million and minimum of $2 bln outstanding • Limited to sequential pay trusts • New benchmark for the Intermediate Portfolio (effective June 1st) : • New Benchmark: Bloomberg Barclays US Intermediate Agg

  19. CIP Review - Most Relevant Updates (II) • Modifications to Article XXII - External Managers • Reorganized the section to focus on manager reviews, to clarify the use of our ranking system and reduce the punitive measures • Quantitative Watch List Factors – Clarify that rankings are based on 1 & 3 year periods, reduced the number of offending managers from bottom 4 to bottom 2 managers • Reduced the factor regarding one year performance to bottom quartile (from bottom half)

  20. Miscellaneous Updates • Staff update: • Kacy Reddick joined investments team as the new Assistant PM Analyst • Megan promoted to Short Duration Portfolio Manager and • Bill Gilbert joined the investments as the new Liquidity Portfolio Manager.

  21. Securities LendingReview

  22. SECURITIES LENDING OVERVIEW as of March 31, 2019

  23. Securities Lending Income

  24. Cash Collateral Portfolio - (Securities Lending) As of March 31, 2019 Total Market Value $2,132.5 million NAV 1.0000 Yield (360 basis) 2.616% Overnight Liquidity % 57.2% Floating Rate Securities % 40.74% Wght. Av. Days to Reset 16 WAM 117 days

  25. Cash Collateral Portfolio - (Securities Lending) As of March 31, 2019 * Repo collateral: U.S. Gov. Securities. Financials 14.3% $304.9 million Non Financials 10.4% $220.8 million

  26. Investment PoolReview

  27. Brief Fixed Income Market Review Treasuries Spread Sectors Q4 - 18 & Q1 - 19 HIGHLIGHTS: Source: Bloomberg and Goldman Sachs • 4th Quarter 2018: Concerns around a slowdown in global growth, weakening business and consumer confidence and potential disruptions from trade war with China combined with a Federal Reserve reluctant to change course led to a significant flight to quality movement: • Treasuries rallied mostly in the 2 to 7-year area leading to an “inversion” in front part of the curve. • Equities and all fixed income spread sectors (led by credit sectors) sold-off significantly. • 1st Quarter 2019: In early January, the Federal Reserve switches to a neutral stance, emphasizing patience about any further interest rates hikes and putting a three-year-old process of policy tightening on hold. The market reaction was very significant: • Treasury yields continued to decline in the 1 to 10 year area of the curve and futures started discounting a rate cut as the Fed next interest rate move. • Equities and spread sectors rallied significantly almost erasing the losses from the 4th quarter.

  28. Treasury Yield Curve • Treasury yields (except maturities shorter than six months) declined significantly during the 4th quarter on a risk off environment and continued to decline in the 1st quarter of 2019 as the Federal reserve switched to a neutral stance. • The belly of the curve inverts as a result of change in the Federal Reserve policy outlook. *Chart Obtained from Bloomberg

  29. Barclays U.S. Corporate Investment Grade Index • Over the fourth quarter of 2018, concerns around a slowdown in global growth, trade tensions and a hawkish Fed resulted in a risk-off investor sentiment and weighed heavily on credit sector (IG underperforming treasuries by 3%). • IG credit spreads tighten significantly in the 1st quarter as the Federal reserve changed to a neutral stance. , almost eliminating the previous quarter widening. *Chart Obtained from Bloomberg

  30. Investment Pool Q4 2018 & Q1 2019 Total Return (excl. Time Deposits)

  31. Investment Pool Total Return (excl. Time Deposits) * Annualized

  32. Total Pool Distribution by Mandate

  33. Total Pool Characteristics Yield 3/31/19: 2.71% Yield 9/30/18: 2.95% Yield 3/31/18: 2.57%

  34. Fair Value Factor

  35. Top 10 Non-US Govt Holdings at March 31, 2019

  36. Basket Clause • September 2018 • 32 items • $25.0 million Market Value • ABS • $21.9 million • 4.63 years WAM / 3.28 years WAL • MBS • $1.7 million • 16.73 years WAM / 7.53 years WAL • CMBS • $0.02 million • 22.91 years WAM / 1.00 WAL • Corporate • $1.4 million • 7.25 years WAM and WAL • $25.2 million Cost • 0.11% of Investment Pool • March 2019 • 29 items • $15.8 million Market Value • ABS • $12.8 million • 4.02 years WAM / 2.77 years WAL • MBS • $1.5 million • 16.20 years WAM / 5.92 years WAL • CMBS • $0.01 million • 23.24 years WAM / 1.08 WAL • Corporate • $1.4 million • 6.61 years WAM and WAL • $16.0 million Cost • 0.07% of Investment Pool Statutes allow for 3% in basket clause items

  37. Pool Rating • Policy requirement: A+ or better using S&P rating matrix • S&P Rating as of March 31, 2019 = AA-f • Credit Score as of March 31, 2019 = 58.40 (AA-f) S&P rating matrix

  38. Portfolio % vs. Allocation Rangesas of March 31, 2019 * avg. of previous 12 end-of-month balances for Liquidity Portfolio.

  39. Individual Mandate Key Characteristics

  40. Individual Mandate Key Characteristics (continued)

  41. Individual Mandates Review

  42. Liquidity, Ultra-Short and Short Duration Portfolios

  43. Liquidity Portfolio - Performance and Attribution TOTAL RETURNS as of March 31, 2019 ATTRIBUTION NOTES 4thQuarter 2018 and 1st Quarter 2019 ( +3.4 b.p.) • +Duration / Yield Curve: Treasury yields sold off in the 0 to 1-year area over 4Q18 to 1Q19. The Fed reversed projections of raising rates during the quarters and the yield curve spiked particularly in the 1-3 month area, which helped performance as a majority of the portfolio is <1 month. Tactical duration plays also helped performance. • +Yield: We continued to benefit from a yield advantage obtained mostly by investing in short-term commercial paper and quarter-end repo’s and to a lesser extent by a small exposure to the 3 to 9 month part of the curve. * not annualized. Information provided by BNY Mellon.

  44. Liquidity Portfolio - Current Strategy / Portfolio Characteristics Current Strategy Portfolio Characteristics Summary Data obtained from BNYM and Bloomberg

  45. Ultra Short Duration Portfolio - Performance and Attribution ATTRIBUTION NOTES TOTAL RETURNS as of March 31, 2019 4th Quarter 2018 and 1st Quarter 2019 ( +3.3 b.p.) • + Yield: The yield advantage can be attributed to the incremental spread gained by purchasing US Agency bullet & callable debt, corporate & SSA debt. While this is a positive in yield advantage it could hurt the portfolio over the short term in performance so it’s obviously something that needs to be managed carefully. • - Duration / Yield Curve: In general we have been short the benchmark over the last 6 months. Broken down much of the short is in the 2YR part of the curve as I have tried to be careful when choosing my entry points. Our callable positions have also steadily gotten shorter which has shrank the duration of the portfolio. So far the yield advantage coupled with some advantageous purchases has outpaced the negative consequences of a portfolio short duration in rallying 2yr. • +/- Non U.S. Government Sector Exposure: The portfolio essentially stayed neutral from the previous period. Given VOL, and in turn the spread market it hasn’t seemed like a beneficial entry point to add. * not annualized. Information provided by BNY Mellon.

  46. Ultra Short Duration Portfolio -Current Strategy / Characteristics Current Strategy Portfolio Characteristics Summary Data obtained from BNYM / Wilshire / Bloomberg

  47. Ultra Short Duration Portfolio – Portfolio Characteristics (continued)

  48. Short Duration Portfolio - Performance and Attribution TOTAL RETURNS as of March 31, 2019 ATTRIBUTION NOTES 4th Quarter 2018 and 1st Quarter 2019 ( -1.7 b.p.) + Yield: We maintained a benchmark-relative yield advantage through a majority of the period. +/-Credit Exposure: IG corporate spreads widened in 4Q18 before tightening throughout 1Q19. The overweight positioning in Corporates detracted from performance during the 4Q18 but was somewhat mitigated by a tactical addition of credit during the period of rising spreads, followed by a subsequent rally. -Duration / Yield Curve: Treasury yields declined sharply in the 1 to 5-year area over 4Q18 to 1Q19. A bias toward short overall duration detracted from performance while exposure to the 3 to 5-year was positive as the yield curve bull flattened over the quarters. Information provided by BNY Mellon. * not annualized.

  49. Short Duration Portfolio - Current Strategy / Portfolio Characteristics Current Strategy Portfolio Characteristics Summary Data obtained from BNYM / Wilshire / Bloomberg

  50. Short Duration Portfolio – Portfolio Characteristics (continued)

More Related