Quarterly Meeting. Participant Local Government Advisory Council (PLGAC) March 23, 2017

Transcription

1 Quarterly Meeting Participant Local Government Advisory Council (PLGAC)

2 General Items Trustee Certification [F.S (6)(a)1] on 3/14/17 agenda Auditor General Annual Financial Audit completed on 1/19/17 Fee Holiday January 1, 2016 through January 31, 2017 ~$175k offset each month Total participant fees offset by reserve = $2,257, Amended Rule approved on 2/9/ Biennial Report issued on 3/14/17 PLGAC Quarterly Meeting 2

3 Service Summary Quarter Ending 12/31/16 Financial Transactions: 1,430 open accounts / 745 participants 4,378 total transactions: 2,966 deposits / 1,412 withdrawals Enrollments: 1 New Participant opening New Accounts 5 New Accounts (among existing participants) 46 Closed Accounts PLGAC Quarterly Meeting 3

4 Operations Line October November December 4Q2016 4Q2015 Transaction Inquiries Performance Inquiries SBA Address Financial Reporting PRIME Account Statement Miscellaneous & Procedures Wiring Instructions Statement Questions & Other Account Activity >1yr ACH Transactions Inquiry Audit Confirmation Wires / ACH Participant Account Form (PAMF) Account Log-in Assistance Posting Errors Federated /BNY Mellon Calls Non Pool Calls Total Number of Calls PLGAC Quarterly Meeting 4

5 Quarterly Fund Flows Quarter Ending 12/31/16 Cash Flows as of 12/31/2016 Fourth Quarter Fiscal YTD* Opening Balance $7,015,873,868 $7,789,430,976 Participant Deposits $9,164,304,549 $12,263,062,398 Gross Earnings $17,393,550 $30,921,200 Participant Withdrawals ($5,649,679,381) ($9,535,521,990) Fees $0 $0 Closing Balance (12/31/2016) $10,547,892,586 $10,547,892,586 Change $3,532,018,718 $2,758,461,610 *Period July 2016 December 2016 PLGAC Quarterly Meeting 5

6 Monthly Fund Flows Billions $12 $10.55 $10 $8 $8.84 $8.87 $8.48 $8.44 $8.06 $7.79 $7.82 $7.36 $7.02 $6.56 $8.20 $6 $4 $2 $0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 -$2 Net Change Deposits Withdrawals Net Asset Value PLGAC Quarterly Meeting 6

7 Growth in Net Asset Value $3,000,000,000 $2,500,000,000 $2,667,304, $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $- $(500,000,000) $(1,000,000,000) $(1,500,000,000) 2 Year Change in NAV PLGAC Quarterly Meeting 7

8 LIBOR Corridor INTEREST RATE BBA LIBOR - USD 1M INTEREST RATE BBA LIBOR - USD 3M Florida PRIME Net Monthly Participant Yield PLGAC Quarterly Meeting 8

9 Yield versus Peer Funds Day Net Yield (annualized) Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Florida PRIME Florida Education Investment Trust Fund (FEITF) Florida Surplus Asset Fund Trust (FLSAFE) Florida Trust - Day to Day Fund (FL Trust Online) * 30 Day Average Net Yield PLGAC Quarterly Meeting 9

10 Yields versus Benchmark Day Net Yield (annualized) Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Florida PRIME S&P AAA/AA GIP Net Index imoneynet First Tier Instit Avg 3 Month T-Bill 1 Month LIBOR PLGAC Quarterly Meeting 10

11 Quarterly Update PLGAC Quarterly Meeting

12 Relationship Overview Florida PRIME Assets: $10.5 billion (as of 12/30/16) 745 Participants 1,429 Accounts Oct. 3-5 Oct th Quarter 2016 Events Florida Council of Business Affairs (COBA) (Tampa) Florida Association of School Business Officials (FASBO) 50 th Anniversary Conference (St. Augustine) Investment Manager Paige Wilhelm Senior Vice President Senior Portfolio Manager Federated Investment Counseling Weekly Market Commentary Monthly Newsletter Quarterly Review Marketing Support Nov Nov Dec. 2 Florida School Finance Officers Association (FSFOA) (Tampa) Florida School Boards/ Superintendents Joint Conference (Tampa Bay) 1st Quarter 2017 Event Jan Florida Council of Business Affairs (COBA) (Daytona Beach) PLGAC Quarterly Meeting 12

13 Timely Delivery of Market Events Response to December Rate Hike An was delivered within 48 hours to Florida PRIME participants highlighting potential yield opportunities. Primary focus points: Rate comparison between Florida PRIME and Fed Funds Ongoing potential for yield advantage as the Pool purchases new, highly-rated commercial paper Florida PRIME seeking to satisfy the dual need of liquidity and a competitive yield We continue to monitor market events and Federal Reserve decisions to bring participants timely, relevant information. PLGAC Quarterly Meeting 13

14 Rising Rates Immediate Impact Florida PRIME Daily Net Yield /1/ /7/ /13/ /19/ /25/ /31/2016 On Wednesday, December 14, the Federal Reserve raised interest rates by 25 basis points. Within one day, Florida PRIME s Daily Net Yield rose 3 basis points. By December 27, Florida PRIME s Daily Net Yield had increased by 10 basis points to 0.99%. The Daily Net Yield as of February 23, 2017 for the Pool was 1.00%. PLGAC Quarterly Meeting 14

15 2017 Conference Calendar Date Event Location Est. Number of Attendees Federated/ Florida PRIME Exhibit and/or Sponsorship Jan Florida Council of Business Affairs (COBA) Daytona Beach 150 June 1-3 Florida City and County Management Association Annual Conference Orlando 250 June Florida Association of Special Districts Orlando 400 June Florida Court Clerks & Comptrollers Summer Conference Panama City 300 June Florida Government Finance Officers Association Annual Conference Hollywood 800 June Florida School Finance Officers Association (FSFOA) Sanibel Island 250 Aug Florida League of Cities 2017 Annual Conference Orlando 1,000 Oct. (TBD) Florida Council of Business Affairs (COBA) Tampa 150 Oct Florida Association of School Business Officials (FASBO) 51st Anniversary Conference St. Augustine 300 Nov Florida School Finance Officers Association Tampa 250 Nov. 28-Dec. 1 Florida School Boards/Superintendents Joint Conference Tampa 600 PLGAC Quarterly Meeting 15

16 Portfolio Review PLGAC Quarterly Meeting 16

17 4th Quarter 2016 Strategy Review The fourth quarter of 2016 had no shortage of events affecting money markets, but it ended on a high note with the U.S. Federal Reserve (Fed) showing faith in the domestic economy by hiking rates. With the majority of preparation for the U.S. Securities and Exchange Commission s (SEC) money market reform completed prior to the Oct. 14 implementation date, the deadline came and went without incident. However, the London interbank offered rate (Libor) remained elevated due to money funds needing to avoid longer-term securities in favor of liquid assets to manage flows. Because Local Government Investment Pools are not subject to the new regulations, they had the opportunity to capture a yield advantage over registered money funds as their more predictable cash flows allowed them to invest in these attractive securities. The story was the same following Republican Donald Trump winning the U.S. presidential election. The market-implied probability of the Fed raising rates dipped immediately after the outcome but jumped back soon after, with nearly unanimous market expectations for an increase in the target rate. In mid- December, that came to pass as policymakers raised both the Federal Funds target rate by 25 basis points to a range of % and the likelihood it would hike again in This action reflected the Fed s increased confidence that the domestic economy is headed in the right direction. The formal statement noted that the labor market was continuing to improve, likely building wage pressures that could help to boost inflation to a normative level. Economic reports over the period were firm, but not as robust as that of the third quarter, which saw a final reading of gross domestic product (GDP) growth of 3.5%. Consumer confidence rose, spending was solid, businesses grew inventories, and manufacturing and construction activity increased. On the municipal front, most local governments finances continued to grow during the fourth quarter as economic progress lifted sales-tax collection and raised real estate valuation. Libor moved higher over the course of the quarter due to the volatile flow environment among money market funds heading into and following the start date of the reforms. One-month Libor leapt 23 basis points to 0.76%, 3-month increased 15 basis points to 1.00% and 6-month rose 8 basis points to 1.32%. PLGAC Quarterly Meeting 17

18 Portfolio Characteristics Period Ending 12/30/16 Portfolio Composition 2.4% 2.1% 2.5% 3.0% 9.1% 7.5% 17.8% 22.4% 33.3% Asset-Backed CP - Fixed Bank Instruments - Fixed Corporate CP - Fixed Bank Instruments - Floating Money Market Mutual Funds Corporate Notes - Floating Corporate CP - Floating Asset-Backed CP - Floating Repurchase Agreements Top 10 Holdings (ex Repos) Credit Agricole Group 5.0% Barton Capital S.A. 5.0% Bank of Montreal 4.9% Mitsubishi UFJ Financial Group, Inc. 4.9% Standard Chartered PLC 4.6% BNP Paribas SA 4.6% DZ Bank AG Deutsche Zentral-Genossenschaftsbank 4.3% Luxembourg, Government of 4.1% Canadian Imperial Bank of Commerce 3.9% Royal Bank of Canada 3.4% Total % of Portfolio 44.5% Country Exposure United States 32.4% Canada 15.0% France 13.5% Japan 10.5% Luxembourg 9.1% Australia 5.7% United Kingdom 5.5% Germany 4.5% Switzerland 3.2% Sweden 0.6% Total % of Portfolio 100% Credit Quality Maturity Schedule Weighted Average Maturity (WAM) Weighted Average Life (WAL) A % A % 1-7 days 8-30 days days days 181+ days 41.6% 16.8% 24.3% 13.3% 4.1% 46.1 days 59.7 days PLGAC Quarterly Meeting 18

19 Performance vs. Index Period Ending 12/30/16 Net Returns (%) as of 12/30/16 1-month 3-month 1-year 3-years 5 years 10-years Since Jan Florida PRIME 30-Day Average Net Yield S&P AAA/AA Rated GIP All 30-Day Net Index Above (Below) Benchmark Notes: Annualized 1-month and 3-month performance figures; S&P AAA & AA GIP All 30-Day Net Yield Index for all time periods shown. PLGAC Quarterly Meeting 19

20 Stress Test Results as of 12/30/16 PLGAC Quarterly Meeting 20

21 Stress Test Footnotes as of 12/30/16 B. Escalation Procedures: If: (1) any deviation between the NAV and the market based NAV in excess of $ per share occurs, or (2) Weekly Liquid assets drop below 30%, Federated will enact escalation procedures for Florida PRIME. C. Assessment of Pool's Ability to Withstand Events Reasonably Likely to Occur During the Following Year: Unless highlighted above for further discussion, the Adviser has determined that the Pool is structured in such a way that the occurrence of the events, described more fully above, which the Adviser believes are reasonably likely to occur during the next 12 months would not result in the Pool s Weekly Liquid Assets falling below 10% or the Pool failing to minimize principal volatility. D. Test Descriptions: Unusual Redemption Activity: Resulting NAV & liquidity levels following redemptions equal to 40% in 10% increments. Change in Interest Rates (Oct): Resulting NAV & liquidity levels following a change in rates of 0.50%. Change in Interest Rates (Nov, Dec): Resulting NAV & liquidity levels following a change in rates of 0.75%. Credit Event: UK and Euro bank spreads widen by 0.50%. Floater Spread Widening: Resulting NAV & liquidity levels following a widening of floater spreads off of the applicable index of 0.25%. Combination: Change in Interest Rates, Credit Event, and Floater Spread Widening combined. E. Redemption Funding Method: Redemptions - Sell Daily Liquidity down to 0 percent then Weekly Liquidity down to 30 percent then based on Final Maturity Date. PLGAC Quarterly Meeting 21

22 Florida PRIME Risk vs. Return 5 Years Ending 12/31/16 Note: Peer group includes 126 money market funds within the imoneynet First Tier Institutional index as of December PLGAC Quarterly Meeting 22

23 Return Distribution Periods Ending 12/31/ % 0.60% Rate of Return (%) 0.50% 0.40% 0.30% 0.20% 0.10% 95th, 0.50% 75th, 0.39% 50th, 0.21% 25th, 0.05% 95th, 0.23% 95th, 0.20% 75th, 0.15% 75th, 0.11% 50th, 0.08% 50th, 0.05% 0.00% 5th, 0.00% 25th, 0.02% 25th, 0.01% 5th, 0.00% 5th, 0.00% -0.10% 1-Year 3-Year 5-Year FL PRIME S&P US AAA & AA Rated GIP All 30-Day Net 1 mo LIBOR Citigroup 90-day T-Bill Note: Peer group includes 126 money market funds within the imoneynet First Tier Institutional index as of December PLGAC Quarterly Meeting 23

24 Risk Distribution Periods Ending 12/31/ % 0.07% 0.06% 95th, 0.07% 75th, 0.05% 95th, 0.06% Standard Deviation (%) 0.05% 0.04% 0.03% 0.02% 0.01% 0.00% -0.01% 50th, 0.04% 75th, 0.04% 50th, 0.03% 25th, 0.02% 95th, 0.02% 25th, 0.02% 75th, 0.01% 50th, 0.01% 25th, 0.01% 5th, 0.00% 5th, 0.00% 5th, 0.00% 1-Year 3-Year 5-Year FL PRIME S&P US AAA & AA Rated GIP All 30-Day Net 1 mo LIBOR Citigroup 90-day T-Bill Note: Peer group includes 126 money market funds within the imoneynet First Tier Institutional index as of December PLGAC Quarterly Meeting 24

25 Open Agenda Items / Audience Comments PLGAC Quarterly Meeting 25

26 Peer Funds Statewide Other funds offering Stable NAV ($1.00) Products Name of Fund [inception date] Type AUM ($B) Benchmark Basis Point Fee Rated Daily Cutoff # of Investors Investment Manager Sponsor Florida PRIME (Local Government Surplus Funds Trust Fund) [10/77] 2a-7 Like GASB 79 Compliant $ S&P AAA/AA Government Investment Pool (GIP) Net of Fees 3 AAAm 1pm EST 732 Federated Investors State Board of Administration (SBA) Florida Trust (Day to Day Fund) [01/09] 2a-7 Like (IRC Section 115 Qualified Trust) $ Month Treasury Bill 14 AAAm 11am EST 12 Payden & Rygel Florida Association of Court Clerks & Comptrollers (FACC) Florida Education Investment Trust Fund (FEITF) [10/10] 2a-7 Like (IRC Section 115 Qualified Trust) $0.377 imoneynet MMF Index 14 1 AAAm 2pm EST 10 PFM Asset Management LLC Florida School Boards Association & Florida Association of District Superintendents Florida Surplus Asset Fund Trust (FLSAFE) [02/08] Non 2a-7 $0.187 S&P LGIP Index 23 1,2 AAAm 1pm EST 25 Prudent Man Advisors, Inc. Florida Management and Administrative Services (FMAS) Florida Cooperative Liquid Assets Securities System (FLCLASS) [08/15] Non 2a-7 n/a n/a 15 AAAm 3pm EST n/a Public Trust Advisors LLC Intergovernmental Investment Pool, Administered by Public Trust Advisors LLC 1 Net fund expense, including all temporary fee waivers. 2 Fund expense excluding custody, rating, and other operating charges not disclosed by fund. PLGAC Quarterly Meeting 26