REPORT TO COUNCIL
SUBJECT
Title
Action on Amendment No. 1 with PFM Asset Management LLC for Investment Management Services
Report
COUNCIL PILLAR
Manage Strategically Our Workforce Capacity and Resources
BACKGROUND
In July 2020, the City Council approved an agreement with PFM Asset Management LLC (PFMAM) to provide investment advisory and portfolio management services after a competitive Request for Proposal (RFP) process. The initial term of the agreement is three years ending on July 31, 2023, plus two option years for a total of five years if all options are exercised.
Under the agreement, PFMAM serves as the City's external investment manager for a pooled portfolio with a value of $847 million as of March 31, 2023. Of this amount, approximately $69 million is invested with the State's Local Agency Investment Fund (LAIF) and California Asset Management Program (CAMP) to meet the City's liquidity needs. PFMAM provides investment advice on City's overall portfolio strategy and actively manages a core securities portfolio.
Prior to engagement of PFMAM, the City's portfolio was internally managed and staff conservatively invested City funds mainly in Treasury and Government Agency Notes due to limited capacity and resources. Under PFMAM, the portfolio has diversified into other allowable investments, in accordance with applicable California State Codes, with higher yield potential, such as corporate notes, asset-backed securities, and municipal notes.
Under PFMAM's management, the City's core securities portfolio has generated over $30 million in interest earnings with total returns outperforming the ICE BofAML 1-5 Year U.S. Treasury Index, City's benchmark, by 20 basis points.
DISCUSSION
PFMAM was contracted by the City as part of an investment strategy transition from an internally managed portfolio that was 100% allocated to federal government-issued U.S. Treasuries and Federal Agency Securities, to one that leverages the expertise of a professional ...
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