Quarterly Meeting Participant Local Government Advisory Council (PLGAC) September 24, 2015

Transcription

1 Quarterly Meeting Participant Local Government Advisory Council (PLGAC) September 24, 2015

2 General Items / Update Florida PRIME/MMF profiles, etc. updated Trustee Certification [F.S (6)(a)1] on 9/29/ Liquidity Redemption Fees September 24, 2015 PLGAC Quarterly Meeting 2

3 Service Summary Quarter Ending 6/30/15 FINANCIAL TRANSACTIONS: 1,642 open accounts / 839 participants 4,646 total transactions: 2,925 deposits / 1,721 withdrawals ENROLLMENTS: 7 New Clients opening New Accounts 6 New Account (among existing clients) 3 Closed Accounts (zero balance closures) September 24, 2015 PLGAC Quarterly Meeting 3

4 Operations Line April May June 2Q2015 2Q2014 Transaction Inquiries Performance Inquiries SBA Address Financial Reporting PRIME Account Statement Miscellaneous & Procedures Wiring Instructions Fund B Questions 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 September 24, 2015 PLGAC Quarterly Meeting 4

5 Fund B Wind Down In early September 2014, 100% of the original principal in Fund B was returned to participants. Additional returns and legal settlements resulted in a remaining reserve balance within Fund B equal to $43.2 million (as of June 30, 2015). On July 13, 2015, the SBA distributed the remaining reserve tied to Fund B based on each participant s proportional share of the total November 2007 interest earned. The proceeds were allocated to those with Florida PRIME accounts directly into their accounts, and for those with no corresponding Florida PRIME account, checks were sent directly to the organization. For participants without Florida PRIME accounts, approximately $1.1 million is yet to be distributed (covering 72 participants). SBA staff continues to work on releasing these remaining funds over the next several weeks. The Trust Fund s termination is anticipated to occur on or before September 30th. September 24, 2015 PLGAC Quarterly Meeting 5

6 Quarterly Update September 24, 2015 PLGAC Quarterly Meeting 6

7 Relationship Overview 2015 Event Calendar Florida PRIME Assets: Investment Manager: $7.0 billion (as of 6/30/15) 790 Participants Paige Wilhelm Senior Vice President Senior Portfolio Manager Federated Investment Counseling - Weekly Market Commentary - Monthly Strategy - Quarterly Review Second Quarter Events: May Florida City & County Management Association Conference, Orlando June 1-3 Florida Court Clerks & Comptrollers Annual Conference, Ponte Vedra June Florida Government Finance Officers Association Annual Conference, Hollywood June Florida School Finance Officers Summer Conference, St. Pete Beach Future 2015 Events: August Orlando, Florida League of Cities Annual Conference September Council of Business Affairs (COBA) September Tampa, Florida Association of District School Superintendents October 5-9 Orlando, Florida Association of School Business Officials Annual Conference November Lake Buena Vista, Florida School Finance Officers Association Fall Conference December 1-4 Tampa, Florida School Boards/Superintendents Joint Annual Conference September 24, 2015 PLGAC Quarterly Meeting 7

8 Marketing Commitment Commitment to: maintain and expand participant base grow assets to meet expectations in every rate environment provide effective liaison role between participants and SBA operations personnel provide education and ensure full transparency of investment management processes Federated on the ground: Participation in at least 10 conferences per year Sponsorship provided at various levels based on scope and relevance Average 200 to 300 attendees for smaller conferences Two largest conferences average 700 to 800 attendees Florida GFOA Florida League of Cities Annual Client meetings/appointments set up before and/or after conferences Federated electronic communication: Literature/Reporting: Weekly Commentary Monthly Strategy Monthly POI Monthly Compliance Checklist Quarterly Factsheet Quarterly Conference Calls/Board Meeting with Investment Management Team September 24, 2015 PLGAC Quarterly Meeting 8

9 Opportunity for Participant Communication Expected Interest Rate Hike The efficient management of the SBA coupled with Federated Liquidity Management offers a compelling story Ideal time to: Re-engage participants Attract new participants Remind participants of the advantages of Florida PRIME The Message: Florida PRIME is well-positioned for yield pickup Competitive cash management from people who understand and are committed to Florida Public Finance Competitive rate coupled with a conservative management approach Getting the Message Out: Targeted campaign Literature and website content Conference Support September 24, 2015 PLGAC Quarterly Meeting 9

10 Florida PRIME Portfolio Review September 24, 2015 PLGAC Quarterly Meeting 10

11 2 nd Quarter 2015 Strategy Review Market Commentary It was only at the end of the first quarter that the U.S. economy shook off the brutal temperatures and excessive snow that froze business and consumer activity in the winter. That set the stage for the pent-up activity to boost metrics in the second quarter, and they did, though in spurts. Over the course of the second quarter, data improved and expectations for a hike in interest rates rose again. The Federal Reserve (Fed) did not announce an increase in the federal funds rate in either of its two policy-making meetings during the quarter. But in the final month, speeches by Fed officials and testimony by Chair Janet Yellen touted the progress of the economy, which increased the likelihood of liftoff in 2015, possibly in early fall. The Fed s move would likely be to a higher range of 25 to 50 basis points rather than a specific rate, with the prospect of additional hikes coming throughout That the Fed seemed poised to raise rates for the first time in nine years represented a divergence from the more accommodative monetary policies of the European Central Bank (ECB), which early in the reporting period initiated its much-anticipated quantitative-easing (QE) program that sent sovereign yields plunging across Europe. Portfolio Composition The Pool ended the second quarter of 2015 at $7 billion in assets under management from $7.5 billion the prior quarter, a decrease of $500 million. Weighted average maturity (WAM) decreased from 35 days to 34 days over the quarter. Weighted average life (WAL) rose from 62 days to 84 days. The changes in the Pool s composition this quarter compared to first quarter of 2015 were as follows: Other U.S. economic developments in the quarter: The housing market had a significant bounce in the second quarter. Sales rose, building permits and starts increased, prices firmed and both mortgage delinquencies and foreclosures declined. In the all-important retail arena, auto sales rose significantly as consumers became more confident about economic conditions, although overall retail sales were modest and actually dipped slightly in June. June saw the headline unemployment rate fall to a seven-year low of 5.3%, edging ever closer to the Fed s definition of full employment. But wage gains remained constrained, hours worked per week were stagnant and the labor participation rate actually worsened, signs that the labor market has yet to reach the level of health sought by Fed policymakers. After being hurt by the strong dollar and the winter slowdown, manufacturing improved as the second quarter went on, buoyed by stabilizing oil prices, a pause in the dollar s strengthening and a reopening of key trade channels. Still, oil prices remained low enough and the dollar robust enough relative to other developed-country currencies that manufacturing activity remained subdued, helping to keep both headline and core inflation below the Fed s targets. The continued strong U.S. dollar relative to other developed-country currencies undermined exports and depressed the manufacturing sector, and lower energy prices depressed capital spending in the energy sector, keeping both headline and core inflation below the Fed s targets. Fixed-rate bank instruments, the portfolio s the highest percentage of holdings, decreased to 20.5% from 25.5% of total (down 5%) Repurchase agreements increased to 6% from 5% (up 1.0%) Floating-rate bank instruments increased their percentage to 13.6% from 12.5% (up 1.1%) Corporate fixed-rate commercial paper decreased to 7.2% from 13.5% (down 6.3%) Money market investments increased in the portfolio to 19.8% from 18.3% (up 1.5%) Floating corporate notes increased to 10.4% from 6% (up 4.4%) Floating corporate commercial paper increased to 5.9% from 1.9% (up 4.0%) Floating asset-backed commercial paper increased to 2.5% from 0.4% (up 2.1%) Fixed-rate asset-backed commercial paper decreased to 14.1% from 16.9% (down 2.8%) The 1- and 3-month London interbank offered rates (Libor) ticked up slightly over the course of the quarter, from approximately 0.18% to 0.19% and from 0.27% to 0.28%, respectively. September 24, 2015 PLGAC Quarterly Meeting 11

12 Portfolio Characteristics Period Ending 6/30/15 Portfolio Composition Top 10 Holdings (ex Repos) Country Exposure 5.9% 6.0% 7.2% 10.4% 13.6% 2.5% 20.5% 19.8% 14.1% Federated Prime Obligations Fund 10.0% Federated Prime Cash Obligations Fund 9.7% J.P. Morgan Chase & Co 5.1% Royal Bank of Canada, Montreal 5.0% Sumitomo Mitsui Financial Group, Inc. 4.9% Standard Chartered PLC 4.9% Wells Fargo & Co. 4.9% Mitsubishi UFJ Financial Group, Inc. 4.8% General Electric Co. 4.4% United States 47.4% Japan 15.6% Canada 13.3% France 4.3% United Kingdom 4.9% Netherlands 5.7% Switzerland 4.0% Germany 2.9% Bank Instruments - Fixed Asset-Backed CP - Fixed Corporate Notes - Floating Rule 2a-7 Mutual Funds Bank Instruments - Floating Corporate CP - Fixed Credit Suisse Group AG 4.0% Total % of Portfolio 57.7% Australia 1.4% Norway 0.5% Repurchase Agreements Asset-Backed CP - Floating Corporate CP - Floating 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 180+ days 40.0% 26.4% 24.4% 6.6% 2.6% 34 days 84 days September 24, 2015 PLGAC Quarterly Meeting 12

13 Performance vs. Index Periods Ending 6/30/15 Net Returns (%) as of 06/30/15 1 month 3 months 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 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. September 24, 2015 PLGAC Quarterly Meeting 13

14 Stress Test Results as of 6/30/15 Date of Stress Tests: 30-Apr 31-May 30-Jun Shadow NAV at time of Test: A. Percentage that must be redeemed to reduce shadow NAV to $0.995: N/A 99.80% 99.15% B. Events that would reduce shadow NAV to $0.995: STRESS TESTING RESULTS DURING THE PERIOD Pct. of Price After Downgrade/Default Shares Change in Interest Rates Largest Issuer Lowest Rated Change in Spread Rates Redeemed Apr May Jun Apr May Jun Apr May Jun Apr May Jun 0% % 94.75% 95.05% 90.05% 90.04% 90.22% % % 96.06% 96.30% 92.53% 92.54% 92.69% % % 97.38% 97.55% 95.01% 95.03% 95.15% % % 98.69% 98.79% 97.49% 97.53% 97.62% CURRENT & PRIOR THREE QUARTERS Pct. of Price After Downgrade/Default Shares Change in Interest Rates Largest Issuer Lowest Rated Change in Spread Rates Redeemed Sep 14 Dec 14 Mar 15 Jun 15 Sep 14 Dec 14 Mar 15 Jun 15 Sep 14 Dec 14 Mar 15 Jun 15 Sep 14 Dec 14 Mar 15 Jun 15 0% % 94.94% 94.63% 95.05% 90.71% 90.13% 90.15% 90.22% % % 96.21% 95.97% 96.30% 93.03% 92.61% 92.61% 92.69% % % 97.48% 97.31% 97.55% 95.35% 95.08% 95.06% 95.15% % % 98.75% 98.65% 98.79% 97.67% 97.56% 97.52% 97.62% C. Assessment of Portfolio s Ability to Withstand Events Reasonably Likely to Occur During the Following Year: Federated Investment Counseling (FIC) does not regard any of the reported Stress Testing results as reasonably likely to occur during the next year. FIC does not anticipate any other events that would cause the portfolio s shadow NAV to fall below $ September 24, 2015 PLGAC Quarterly Meeting 14

15 Quarterly Fund Flows Quarter Ending 6/30/15 *Period July 2014 June 2015 September 24, 2015 PLGAC Quarterly Meeting 15

16 Monthly Fund Flows Billions $9 $8 $7 $6.89 $6.55 $6.12 $6.36 $7.88 $7.82 $7.72 $7.50 $7.58 $7.38 $7.00 $6 $5.37 $5 $4 $3 $2 $1 $0 -$1 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 -$2 Deposits Withdrawals Net Change Net Asset Value September 24, 2015 PLGAC Quarterly Meeting 16

17 Rolling 12 Month Net Change $- Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 $(100,000,000) $(200,000,000) 1 Year Change in NAV $(300,000,000) $(400,000,000) $(500,000,000) $(600,000,000) $(700,000,000) $(800,000,000) September 24, 2015 PLGAC Quarterly Meeting 17

18 Performance (as of 6/30/15) Stable NAV ($1.00) Products* Day Net Yield (annualized) Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Florida PRIME Florida Surplus Asset Fund Trust (FLSAFE) Florida Trust - Day to Day Fund (FL Trust Online) imoneynet First Tier Instit Avg Florida Education Investment Trust Fund 3 Month T-Bill * 30 Day Average Net Yield September 24, 2015 PLGAC Quarterly Meeting 18

19 Performance (as of 6/30/15) Stable NAV ($1.00) Products* Day Net Yield (annualized) Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Florida PRIME Florida Surplus Asset Fund Trust (FLSAFE) Florida Trust - Day to Day Fund (FL Trust Online) imoneynet First Tier Instit Avg Florida Education Investment Trust Fund 3 Month T-Bill * 30 Day Average Net Yield September 24, 2015 PLGAC Quarterly Meeting 19

20 Florida PRIME Risk vs. Return 5 Years Ending 6/30/15 Florida PRIME 1 M LIBOR S&P US AAA & AA Rated GIP All 30-Day Net 90-Day T-Bill Note: Peer group includes 408 money market funds within the imoneynet First Tier Institutional index. September 24, 2015 PLGAC Quarterly Meeting 20

21 Return Distribution Periods Ending 6/30/15 Note: Peer group includes 408 money market funds within the imoneynet First Tier Institutional index. September 24, 2015 PLGAC Quarterly Meeting 21

22 Risk Distribution Periods Ending 6/30/15 Note: Peer group includes 408 money market funds within the imoneynet First Tier Institutional index. September 24, 2015 PLGAC Quarterly Meeting 22

23 Open Agenda Items / Audience Comments September 24, 2015 PLGAC Quarterly Meeting 23

24 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(s) Sponsor Florida PRIME (Local Government Surplus Funds Trust Fund) [10/77] 2a-7 Like $8.5 S&P AAA/AA Government Investment Pool (GIP) Net of Fees 3.0 AAAm 1pm EST 801 Federated Investors State Board of Administration (SBA) Florida Trust (Day to Day Fund 3 ) [01/09] Non 2a-7 $0.6 3 Month Treasury Bill 11 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) $0.3 none publicly reported 13 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 $0.1 S&P LGIP Index 22 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] AAAm 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. 3 Fund s website went dark in February September 24, 2015 PLGAC Quarterly Meeting 24