STAR Update December 8, 2015 James Pisula, Investment Officer, Office of Ohio Treasurer Josh Mandel Zach Amendolea, Investment Officer, Office of Ohio Treasurer Josh Mandel Jason Click, President, Public Funds Administrators If you are having technical difficulties, please call Go To Webinar at (800) 263-6317
CPIM Eligibility ½ hour of CPIM credit Must stay on for entire presentation Your information will be sent to CPIM for you 2
Ohio Checkbook 3
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A first-of-its-kind online checkbook, setting a new national standard for government transparency Available to the 3,962 local governments and school districts across the state More than 125 schools and local governments have posted their spending on OhioCheckbook.com 5
Free and voluntary partnership to host, post and display local government checkbooks Moves static financial data into a user friendly and searchable format Please email PublicAffairs@tos.ohio.gov for more information 6
Local Government Investment Pool Managed By The State Treasurer of Ohio 7
Over $3.35 billion in Deposits Composition 11/30/2014 11/30/2015 Gov't Bond - 28% Repo - 20% Corporate Bond - 6% Commercial Paper - 33% Cash - 13% Gov't Bond - 25% Repo - 5% Corporate Bond - 14% Commercial Paper - 34% Cash - 22% 8
STAR Ohio Yield vs. Treasury 0.25 STAR Treasury Bills Avg Money Fund 0.20 0.15 0.10 0.05 0.00-0.05 Dec-14 Mar-15 Jun-15 Sep-15 Dec-14 Mar-15 Jun-15 Sep-15 Nov-15 Past performance is not a guarantee of future results. Current yield may change without notice due to changes in market or business conditions. Yields shown are for the 3 month U.S. Treasury Bill and 7-Day Crane Money Fund Averages. Source: Bloomberg as of 11/30/15 9
STAR Ohio Program Reminders Inform Client Services 24 hours in advance if deposits or redemptions will exceed $25 million in one day STAR Ohio participants will be emailed an invitation to participate in a short survey. Please take a moment to complete this survey, your opinion is important to help us evaluate STAR Ohio features. Incoming wires to STAR Ohio must be received by fund close Visit www.starohio.com for: Updated forms Online statements Account applications Dates of holidays and early fund close Questions? Need Online Access? Call STAR Ohio Client Services at 1-800-648-7587. 10
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Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 In billions Over $2.4 Billion in Deposits $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $2,407,898,762 in Deposits 668 Total Participants $- Data as of 11/30/2015 12
STAR Plus Yield History 0.25 STAR Plus U.S. Treasury Bills MMKT 0.20 0.15 0.10 0.05 0.00-0.05 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Past performance is not a guarantee of future results. Current yield may change without notice due to changes in market or business conditions. Yields shown are for the 3 month U.S. Treasury Bill and 7-Day Crane Money Fund Averages. Source: Bloomberg as of 11/30/15 13
STAR Plus Program Reminders Minimum to open decreased to $250,000 Daily cutoff times increased from 9 a.m. to 10 a.m. Twice weekly liquidity Deposit Maximum Increased 14
Deposit maximum increased to 15
Program Comparisons 16
Program Assets $1.16 Billion Added in 18 months Billions $7 STAR Plus STAR Ohio $6 $5 $4 $3 $2 $1 $0 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Data as of 9/30/2015
What drives the yields of STAR Ohio and STAR Plus? STAR Ohio Yield is based on portfolio of underlying securities STAR Plus Yield is based on underlying bucket of bank deposit accounts Yield of securities is largely based on economic factors and expectations for interest rates, as well as credit risk As securities mature, the rate at which they can be reinvested depends on economic conditions at that time Current securities include: US Treasuries, US Government Agencies, Commercial Paper, Corporate Bonds, Repurchase Agreements, and Money Market Funds Yield of bank deposit accounts is based upon each banks current desire for deposits As banks demand for deposits increase, the bank will increase the rate it pays in order to attract deposits As banks demand for deposits decreases, the bank will decrease the rate it pays in order to push deposits out of the bank Economic outlook has less effect on bank rates 18
Safety Features STAR Ohio Annually reviewed and rated by Standard and Poor s STAR Ohio is assigned the highest principal stability fund rating of AAAm Demonstrates extremely strong capacity to maintain principal stability and to limit exposure to principal losses due to credit risk. STAR Plus FDIC-insured up to $50 million in deposits Proprietary software ensures FDIC limits are not surpassed at any one bank
Interest Rate Environment 20
Interest Rate Environment Short term interest rates have increased due to upcoming FED decision Change in U.S. Treasury Debt in 2016 Monetary policy remains accommodative 21
Interest Rate Environment Over the past year the yield curve has flattened Source: Bloomberg as of 12/03/15 22
U.S. Economic Data 23
U.S. Economic Factors Employment October unemployment rate at 5.0% Lowest rate since June of 2008 Participation lowest since 1970s Inflation October 2015 Core PCE was 1.3% Continues to be below the FOMC threshold of 2% Other Retail Sales figures have underperformed Manufacturing in U.S. is contracting 24
U.S. Economic Data U.S. Unemployment Rate (12/05/05 10/31/15) Source: Bloomberg as of 12/03/15 25
U.S. Economic Data U.S. Labor Force Rate (12/13/75 10/31/15) Source: Bloomberg as of 12/03/15 26
U.S. Economic Data U.S. Gross Domestic Product (GDP) (12/06/00-9/30/15) Source: Bloomberg as of 12/03/15 27
U.S. Economic Data Upcoming economic data releases 12/11 Retail Sales 12/16 FOMC meeting & press conference 12/22 GDP Revision 12/23 PCE Core YoY 28
FOMC Preview 29
Reasons FED may increase Low unemployment level could be the main focus Unemployment approaching natural rate Average hourly wages are increasing Auto sales are above expectations Housing recovery is strong according to recent data Mortgage applications & construction activity are increasing 30
Reasons FED will not increase Lack of inflation will make the strongest case Continue to monitor changes in economic indictors Commodity prices continue to decline Continue to monitor price of oil China economic slowdown Global equity markets remain fragile 31
Questions? 32
Thank You Thank you for your time today. If you have questions regarding the presentation, please feel free to contact us or the STAR Ohio Co-Administrator Public Funds Administrators (PFA): Office of Ohio Treasurer Josh Mandel (614) 466-3511 Public Funds Administrators (800) 648-7827 33