INFORMATIONAL REPORT

Transcription

1 INFORMATIONAL REPORT DATE ISSUED: December 18, 2012 REPORT NO: HCR ATTENTION: Chair and Members of the San Diego Housing Commission For the Agenda of January 18, 2013 SUBJECT: Investment Report First Quarter Fiscal Year 2013 COUNCIL DISTRICT: Citywide NO ACTION IS REQUIRED ON THE PART OF THE HOUSING COMMISSION SUMMARY: The Quarterly Investment Report (Attachment) reflects the status of the San Diego Housing Commission s ( Housing Commission ) investment portfolio as of. The report includes dashboard and detailed information on all money under the direction or care of the Housing Commission. The quarter-ending portfolio market value was $ million with a yield to maturity of 1.15 percent, average days to maturity of 660, and an effective duration of years. The portfolio consists of the following: 1. $21.72 million is held in the Housing Commission s main checking account and other various authorized accounts required by lending agreements and program obligations. The combined rate of return on these accounts was 0.21 percent for the quarter, down slightly from the prior quarter return of 0.25 percent. 2. $26.25 million is held in pooled investment funds. Pooled funds include California s Local Agency Investment Fund ( LAIF ) and the San Diego County Investment Pool ( SDCIP ). Return on pooled investments of 0.44 percent is down slightly over the prior quarter yield of 0.46 percent. 3. $82.00 million is held in Agency Debentures, Mortgage-Backed Securities ( MBS ) and Corporate Bonds. The blended rate of return for the quarter was 1.64 percent and remains the same as the prior period yield. 4. $1.12 million is held in US Bank Bankers Acceptances notes ( BA ). The yield on these short term investments remains the same as the prior period at 0.50 percent. 5. $0.97 million is held in various FDIC-insured Certificates of Deposit ( CD ). There were no CDs in the previous period. The current rate of return is 1.06 percent.

2 December 18, 2012 Investment Report First Quarter Fiscal Year 2013 Page 2 DISCUSSION: Cash balances at the end of the quarter are relatively high in relation to the previous quarter. There are two primary reasons for the increase. First, cash was needed for the anticipated acquisition of Park Crest in the first part of October. Secondly, the Housing Commission is still in negotiations with the U.S. Department of Housing and Urban Development ( HUD ) to grant access, in the form of partner distributions, to the Federal Housing Administration Limited Liability Company ( FHA LLC ) bank accounts. These accounts were set up under the Housing Commission s original debt issuance. The cash flow from the properties that fall under the FHA LLCs continues to flow into these accounts. Until these negotiations with HUD are concluded, these funds must remain in their respective operating accounts. Funds invested in pooled accounts decreased during the year. This is also a result of the anticipated Park Crest acquisition. Funds were diverted from the liquid pooled account, specifically SDCIP, so that cash would be available in the first part of the month of October for the Park Crest acquisition. Bond investments increased only slightly over the previous period. Most of the increase is unrealized gain from positive changes to the market value of the bonds held in the portfolio. The majority of cash from interest, principal and maturities was reinvested in the bond market. The minor changes in the bond assets were reinvested in equivalent yielding bonds, allowing the portfolio to maintain the 1.64 percent yield to maturity but also extending the average days to maturity on that asset class. Certificates of Deposit are not a new asset class for the portfolio but have been absent from the portfolio for some time. As can be seen from the average yield of 1.06 percent, these securities provide an opportunity to increase yield without adding additional risk to the portfolio. However, to remain FDIC-insured, CDs must be purchased in increments under the insurance limit of $250,000 and care must be taken to ensure investments are not made with the same entity or their affiliated organizations. Given the restrictions on remaining FDIC-insured and the limited number available in the secondary market, total investment in this asset class is not expected to increase dramatically. Although the overall portfolio yield to maturity dropped from 1.19 percent to 1.15 percent, the Housing Commission s yield did not fare as badly as the decline in the U.S 2-yr Treasury rate. The drop in the 2-yr Treasury rate, from 0.33 percent on June 30, 2012 to 0.23 percent on, increased the spread or gap between this benchmark and the Housing Commission s portfolio. Given that the Effective Duration of the Housing Commission is well under 2 years and currently at 1.609, the 2-yr Treasury remains an effective benchmark against the Housing Commission s very conservative portfolio. CONCLUSION: Interest rates over the last several years remain stubbornly low with no signs of a material change in the foreseeable future. In anticipation of continued low rates, the Housing Commission s investment strategy is to continue purchases of longer (3-5 year stated maturity) MBS. MBS pay down a portion of the principle bond investment along with interest every month, making them a likely choice for long-term investment. In addition to providing a steady stream of cash, the principal pay down feature of these bonds reduces the amount of principle tied to a fixed rate when rates finally begin to sustainably rise.

3 December 18, 2012 Investment Report First Quarter Fiscal Year 2013 Page 3 Respectfully submitted, Kevin DeRieux Kevin DeRieux Director Financial Services Approved by, Jennifer Adams-Brooks Jennifer Adams-Brooks Executive Vice President & Chief of Staff San Diego Housing Commission Attachment: SDHC Quarterly Financial Investment Report Ending March 31, 2012 Hard copies are available for review during business hours in the main lobby of the San Diego Housing Commission offices at 1122 Broadway, San Diego, CA and at the Office of the San Diego City Clerk, 202 C Street, San Diego, CA You may also review complete docket materials on the San Diego Housing Commission website at

4 Attachment 1 San Diego Housing Commission Quarterly Financial Investment Report For the Quarter Ending

5 Table of Contents I. Investment Policy Summary 1 II. Investment Portfolio Summary by Investment Type 2 III. Investment Portfolio Credit Quality by Quarter 3 IV. Investment Portfolio Asset Allocation by Quarter 4 V. Investment Portfolio Maturity Schedule 5 VI. Investment Portfolio vs. 2-yr Treasury & Total Invested 6 VII. Investment Portfolio Detail 7-10 VIII. Glossary of Terms 11

6 INVESTMENT POLICY SUMMARY On August 19, 2005 SDHC approved an Investment Policy which provides the surplus funds, not required for the immediate necessities of the local agency, may be invested in accordance within the provisions of U.S. Department of Housing & Urban Development (HUD) Notice PIH and California Government Code Sections 5922 and The approved Investment Policy contains provisions concerning the Standard of Care that include Prudence, Ethics, Conflict of Interest and Delegation of Authority. Additional provisions of the Investment Policy covered the General Objectives of Safety, Liquidity, Yield and Local Considerations, Authorized Financial Institutions, Depositories and Broker/Dealers, Safekeeping assets and Custody of Investment Instruments, Authorized and Suitable Investments and Collateralization and Diversification. 1

7 SAN DIEGO HOUSING COMMISSION PORTFOLIO SUMMARY BY INVESTMENT TYPE Investments Book Value Percent of Market Value Market Unrealized Original Yield to Days to Cash Accounts $ % $ % $ % 1 Local Agency Investment Fund (LAIF) $ % $ % $ % 1 San Diego County Investment Pool (SDCIP) $ % $ % $ % 1 Agency Bonds $ % $ % $0.03 1, % 1,074 Corporate Bonds $ % $ % $ % 876 Bankers Acceptance Notes (BA) $ % $ % $ % 7 Certificate of Deposits (FDIC) $ % $ % -$0.01 1, % 989 Cash & Investments $ % $ % $ % 660 Current Portfolio Effective Duration Years Investments Book Value Percent of Market Value Market Unrealized Original Yield to Days to Cash Accounts $ % $ % $ % 1 Local Agency Investment Fund (LAIF) $ % $ % $ % 1 San Diego County Investment Pool (SDCIP) $ % $ % $ % 1 Agency Bonds $ % $ % -$0.43 1, % 1,013 Corporate Bonds $ % $ % -$ % 968 Bankers Acceptance Notes (BA) $ % $ % $ % 99 Certificate of Deposits (FDIC) $ % $ % $ % 0 Cash & Investments $ % $ % -$ % 670 Current Portfolio Effective Duration Years June 30,

8 Credit Quality Non Rated 8.25% FDIC 0.74% Collateralized 16.45% A1/P1 0.85% A+ 2.74% AAA 65.35% AA 2.41% AA+ 3.22% Non Rated 7.81% FDIC 0.00% Credit Quality June 30, 2012 Collateralized 9.69% A+ 2.84% A1/P1 0.88% AA 2.48% AA+ 3.35% AAA 72.95% Note: Mortgage backed securities (MBS) are included with other AAA rated securities. While Standard & Poor s and Moody's does not specifically rate MBS, they carry an implied AAA rating based on the collateral that backs the bonds and the rating of the Agency (Fannie/Freddie) that issues/guarantees them. Non Rated securities in SDHC's portfolio represents investments in the State of California's Local Agency Investment Fund (LAIF). The lack of a rating should not be viewed as an indication of the credit quality of this investment. *Based on Market Value of Assets 3

9 ASSET ALLOCATION BY QUARTER LAIF 8.25% SDCIP 11.63% Agency Bonds 53.73% Cash 16.45% Corp Bonds 8.37% Certificate of Deposit 0.74% Bankers Acceptance 0.85% June 30, 2012 Market Value in Millions 06/30/12 09/30/12 Variance Cash $ $ $ 9.45 LAIF $ 9.89 $ $ 1.01 SDCIP $ $ $ (6.98) Agency Bonds $ $ $ 0.91 Corp Bonds $ $ $ 0.06 Bankers Acceptance $ 1.12 $ 1.12 $ - Certificate of Deposit $ - $ 0.97 $ 0.97 Total $ $ $ 5.43 SDCIP 17.64% Agency Bonds 55.31% LAIF 7.81% Cash 9.69% Corp Bonds 8.68% Certificate of Deposit 0.00% Bankers Acceptance 0.88% * Based on Market Value of Assets 4

10 Investments 1 day 31 days 91 days 181 days 271 days 1 year 2 years 3 years Total to to to to to to to to by 30 days 90 days 180 days 270 days 1 year 2 years 3 years 5 years Asset Cash $ $ - $ - $ - $ - $ - $ - $ - $ LAIF SDCIP Agency Bonds Corp Bonds Bankers Acceptance CD (FDIC) Total by Maturity $ $ 0.64 $ 4.14 $ 8.47 $ 1.24 $ 7.07 $ $ $ Percent by Maturity 36.38% 0.49% 3.13% 6.42% 0.94% 5.36% 12.30% 34.98% % * Based on Market Value of Assets $60.00 Investment Portfolio Maturity Schedule $50.00 $40.00 $30.00 $20.00 $10.00 $ 1 day 30 days 90 days 180 days 270 days 1 year 2 years 3 5 years 5

11 2 yr Treasury Vs. SDHC Investments 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2 yr Treasury SDHC Actual Total Portfolio Market Value Total Invested 6

12 San Diego Housing Commission Cash and Investment Report As of Investments Cash Accounts Issuer Book Value Percent of Market Value Market Unrealized Original Yield to Days to SDHC Operating Account U.S. Bank $ % $ % $ % 1 Belden FNMA LLC Operating U.S. Bank $ % $ % $ % 1 Belden FNMA LLC Security Deposit U.S. Bank $ % $ % $ % 1 Belden FNMA LLC Res. (10002) Greystone $ % $ % $ % 1 Central FNMA LLC Operating U.S. Bank $ % $ % $ % 1 Central FNMA LLC Security Deposit U.S. Bank $ % $ % $ % 1 Central FNMA LLC Res. (10003) Greystone $ % $ % $ % 1 North FNMA LLC Operating U.S. Bank $ % $ % $ % 1 North FNMA LLC Security Deposit U.S. Bank $ % $ % $ % 1 North FNMA LLC Res. (10004) Greystone $ % $ % $ % 1 Central FHA LLC Operating U.S. Bank $ % $ % $ % 1 Central FHA LLC Security Deposit U.S. Bank $ % $ % $ % 1 Central FHA LLC Res. (0538) PNC Bank $ % $ % $ % 1 Northern FHA LLC Operating U.S. Bank $ % $ % $ % 1 Northern FHA LLC Security Deposit U.S. Bank $ % $ % $ % 1 Northern FHA LLC Res. (0539) PNC Bank $ % $ % $ % 1 Southern FHA LLC Operating U.S. Bank $ % $ % $ % 1 Southern FHA LLC Security Deposit U.S. Bank $ % $ % $ % 1 Southern FHA LLC Res. (0540) PNC Bank $ % $ % $ % 1 CDBG Loan Loss Res. (9591) Wells Fargo $ % $ % $ % 1 Hotel Sandford Operating (1525) Union Bank $ % $ % $ % 1 Hotel Sandford Security Dep. (1517) Union Bank $ % $ % $ % 1 Hotel Sandford Rep. Res. (6179) Union Bank $ % $ % $ % 1 Mariner's Village Operating (8802) Union Bank $ % $ % $ % 1 Mariner's Village Repl. Res (8853) Union Bank $ % $ % $ % 1 Mariner's Village Security Dep (8799) Union Bank $ % $ % $ % 1 Investment Safekeeping Merrill Lynch $ % $ % $ % 1 Total Cash Accounts $ % $ % $ % 1 Investments Bankers Acceptance Notes Issuer Book Value Percent of Market Value Market Unrealized Original Yield to Days to Bankers Acceptance Notes U.S. Bank $ % $ % $ % 1 Bankers Acceptance Notes U.S. Bank $ % $ % $ % 57 Total Cash Accounts $ % $ % $ % 7 7

13 San Diego Housing Commission Cash and Investment Report As of Investments Pooled Investments Issuer Book Value Percent of Market Value Market Unrealized Original Yield to Days to Local Agency Investment Fund State of CA $ % $ % $ % 1 SD County Investment Pool County of SD $ % $ % $ % 1 Total Pooled Investments $ % $ % $ % 1 Investments Bond Investments (CUSIP) Issuer Book Value Percent of Market Value Market Unrealized Original Yield to Days to Agency MBS 31385WYT0 FNMA P $ % $ % -$ % WYT0 FNMA P $ % $ % $ % C7G0 FNMA P $ % $ % $0.00 1, % JQ76 FNMA P $ % $ % $ % JQ76 FNMA P $ % $ % $ % JQ76 FNMA P $ % $ % $ % SQX9 FNMA P $ % $ % $0.00 1, % WWH8 FNMA P $ % $ % $ % WWX3 FNMA P $ % $ % $ % WXU8 FNMA P $ % $ % $ % WXU8 FNMA P $ % $ % $ % WZ51 FNMA P $ % $ % $ % DGL7 FNMA P $ % $ % $ % KGB7 FNMA P $ % $ % $ % SYD4 FNMA P $ % $ % $ % XAP2 FNMA P $ % $ % $ % KRK5 FNMA P $ % $ % $ % XBC0 FNMA P $ % $ % $ % XBC0 FNMA P $ % $ % -$ % XBC0 FNMA P $ % $ % -$ % XBC0 FNMA P $ % $ % -$ % KDV6 FNMA P $ % $ % -$ % HEB8 FNMA P $ % $ % -$ % XHZ3 FNMA P $ % $ % $0.00 1, % XHZ3 FNMA P $ % $ % $ % QSS1 FNMA P $ % $ % $ % KR90 FNMA P $ % $ % $ % Q7B1 FNMA P $ % $ % $ % K4Z7 FNMA P $ % $ % $ % 274 8

14 Investments Bond Investments (CUSIP) San Diego Housing Commission Cash and Investment Report As of Issuer Book Value Percent of Market Value Market Unrealized Original Yield to Days to 31377THS8 FNMA P $ % $ % $ % GUS1 FNMA P $ % $ % $ % XNX1 FNMA P $ % $ % $0.00 1, % CVJ8 FNMA P $ % $ % $ % TPX8 FNMA P $ % $ % $ % CPF3 FNMA P $ % $ % $ % CVJ8 FNMA P $ % $ % $ % UDC4 FNMA P $ % $ % $ % QSQ5 FNMA P $ % $ % $ % QSR3 FNMA P $ % $ % $ % UFS7 FNMA P $ % $ % -$0.01 1, % UFZ1 FNMA P $ % $ % $0.00 1, % Q6Y2 FNMA P $ % $ % $ % RL23 FNMA P $ % $ % $0.00 1, % RL23 FNMA P $ % $ % $0.01 1, % UKE28 FNMA P $ % $ % -$ % JGN6 FNMA P $ % $ % $0.00 1, % JGU07 FNMA P $ % $ % -$0.01 1, % 1, DA82 FNMA P $ % $ % $0.04 1, % 1, UUK7 FNMA P $ % $ % -$0.01 1, % 1, JJ60 FNMA P $ % $ % $0.02 1, % 1, N7B3 FNMA P $ % $ % $0.02 1, % 1, DTJ8 FNMA P $ % $ % $0.07 1, % 1, DV48 FNMA P $ % $ % $0.01 1, % 1, DTJ8 FNMA P $ % $ % $0.01 1, % 1, DV48 FNMA P $ % $ % -$0.01 1, % 1, K5M5 FNMA P $ % $ % -$0.05 1, % 1, LLR6 FNMA P $ % $ % -$0.05 1, % 1, LET0 FNMA P $ % $ % -$0.05 1, % 1, LET0 FNMA P $ % $ % -$0.03 1, % 1, ANLP8 FHLMC $ % $ % $0.02 1, % 1, TLY4 FNMA P $ % $ % -$0.01 1, % 1, FY58 FNMA P $ % $ % $0.12 1, % 1, ULQ8 FNMA P $ % $ % $0.01 1, % 1,705 9

15 San Diego Housing Commission Cash and Investment Report As of Investments Issuer Book Value Percent of Market Value Market Unrealized Original Yield to Days to Bond Investments (CUSIP) Corporate Bonds 36962G4C5 (S&P AA+) GE $ % $ % -$ % G4G6 (S&P AA+) GE $ % $ % $ % WBJ8 (S&P AA-) MFCCN $ % $ % $ % BAH5 (S&P AA-) MET $ % $ % $0.01 1, % BEU0 (S&P A+) WFC $ % $ % $0.01 1, % BFF2 (S&P A+) WFC $ % $ % $0.01 1, % G5Y6 (S&P AA+) GE $ % $ % -$0.01 1, % 1,703 Total Bond Investments $ % $ % $0.05 1, % 1,048 Investments Issuer Book Value Percent of Market Value Market Unrealized Original Yield to Days to Certificate of Deposit (CD) CD Collateralized 38143AZS7 GS $ % $ % $ % WY94 GECAPF $ % $ % $ % GN4 DFS $ % $ % $0.00 1, % 1, QS87 GMATBK $ % $ % $0.00 1, % 1,096 Total Certificate of Deposits $ % $ % -$0.01 1, % 989 Total Cash & Investments $ % $ % $ % 660 Statement of Compliance: I certify to the best of my knowledge and belief that all investment transactions executed have been in full compliance with the investment policy of the San Diego Housing Commission. Kevin DeRieux Kevin DeRieux Investment Officer Date 10

16 GLOSSARY OF INVESTMENT PORTFOLIO TERMS Agency - See GSE Banker Acceptance Notes (BA) - A time draft drawn on, and stamped as "accepted" by a bank. Often issued in conjunction with Letters of Credit and guaranteed by both the debt and the issuing bank. Blended Rate of Return - See Weighted Average Return. Book Value - The value at which a security is carried on the financial records of an investor. The book value may differ significantly from the security's current value in the market or market value. Basis Point (BP) - is one hundredth of a percentage point (0.01%). Basis points are often used to measure changes in yields between securities that often move in very small Certificate of Deposit (CD) - A time deposit with a specific maturity evidenced by a certificate. CDs are 100% collateralized and/or FDIC insured. Collateralization - Process by which financial institutions pledge securities, property, or other deposits for the purpose of securing cash and investments. Corporate Bond - Debt obligations, or IOU's, issued by private and public corporations. CUSIP - Committee on Uniform Security Identification Procedures. A unique 9-charater alphanumeric identifier assigned to a bond at the time it is issued. Debenture - A bond secured only by the general credit of the issuer. DFS - A ticker or stock symbol for Discovery Bank Earnings Credit (EC) - An adjustment factor based on average account balances that reduce bank service charges on business checking accounts. Effective Duration - A measure of price sensitivity of a fixed income portfolio given a parallel shift in interest rates. Lower duration (in years) = lower price sensitivity. FDIC - Federal Deposit Insurance Corporation a federally sponsored corporation that insures accounts in national banks and other qualified institutions. FFCB - Federal Farm Credit Bank, a GSE. FHLB - Federal Home Loan Banks, a GSE. FHLMC - Federal Home Loan Mortgage Corporation or Freddie Mac, a GSE. Floating Rate Bond - A bond whose interest rate is adjusted periodically according to a predetermined formula; it is usually linked to an interest rate index such as LIBOR. FNMA - Federal National Mortgage Association or Fannie Mae, a GSE. GE - A ticker or stock symbol for General Electric Co. GECAPF - A ticker or stock symbol for GE Capital Bank. GMATBK0 - A ticker or stock symbol for Ally Bank GS - A ticker or stock symbol for Goldman Sachs GSE (Agency) - Government Sponsored Enterprise. Privately owned, publicly chartered entities, such as Fannie Mae or Freddie Mac, created by Congress to reduce the cost of capital for certain borrowing sectors of the economy. LAIF - Local Agency Investment Fund. The State of California s government investment pool run by the State Treasurer s office. Liquidity - The ability to convert an asset to cash quickly. Market Value - An estimation of the price that could be obtained for a particular investment or asset if it were sold in an arm s length transaction on the current market. MFCCN - A ticker or stock symbol for Manulife Financial Corporation. MET - A ticker or stock symbol for MetLife Inc. MBS - Mortgage-Backed Security is a type of asset-backed security that is secured by a mortgage or collection of mortgages where monthly interest and principle payments are often redirected to bondholders. MS - A ticker or stock symbol for Morgan Stanley. NNB - Neighborhood National Bank. Repurchase Agreement (Repo or RP) - An agreement to buy/sell securities at a specified price and a simultaneous agreement to repurchase the securities at a specified later date. SDCIP - San Diego County Investment Pool. SLY - Safety, Liquidity & Yield. An investment strategy where the primary objective is the Safety of principle first, the Liquidity of investments to meet operating requirements second and where Yield only considered after the requirements of Safety and Liquidity have been met. S&P - Standard and Poors Unrealized Gain (Loss) - The difference between the book value of an investment and the current market value/price. Weighted Average Return - The average yield on a group of investment that takes into account the proportional relevance of each component. WFC - A ticker or stock symbol for Wells Fargo. Yield-To-Maturity (YTM) - The rate of return yielded on a bond or other investment if it is held until the maturity date. 11