Florida Local Government Investment Trust Annual Florida Trust Seminar 1:30PM – 2:20PM Presenter: Faye Henry

Florida Local Government Investment Trust Annual Florida Trust Seminar Introduction – Economic Update for City Treasurers Who am I? BSc MA – Economics CPA, CTP, CFE, CGMA Training and Experience Internal Audit – Insurance Investments Assistant Treasurer – P&C Insurance Treasurer – City of Delray Beach, City of Port St Lucie

Florida Local Government Investment Trust Annual Florida Trust Seminar Presentation Brief overview of investing public funds (5) Cash forecast and how it is used, results (15) Economic indicators and how they are used to update the investment strategy (15) Update of economic indicators (15)

Florida Local Government Investment Trust Annual Florida Trust Seminar Investing The pillars of investment management in the public sector are: Preserve principal (inflation) Safety (risk mgmt.) Returns

Florida Local Government Investment Trust Annual Florida Trust Seminar Best practice suggests that one should have more than one portfolio Cash – completely liquid Enhanced Cash – up to 365 days Bond – up to 5 years

Florida Local Government Investment Trust Annual Florida Trust Seminar Types of investment styles are: Passive - laddering Active – using investment portfolio management detailed below We use a combination of active and passive styles Diversification – limit amounts in each category – Corporate, Federal … Individual name and sector maximums Company and market reviews

Florida Local Government Investment Trust Annual Florida Trust Seminar Key tools in investment management are: Cash forecast – daily, weekly, monthly, quarterly update Investment policy – annual updates Investment strategy – quarterly updates

Florida Local Government Investment Trust Annual Florida Trust Seminar Poll question: How many of you update your cash forecast on a daily or weekly basis? How many of you engage in active vs passive portfolio management?

Florida Local Government Investment Trust Annual Florida Trust Seminar Here is what we do on a daily basis I update the cash forecast and on a monthly basis, I also update the cash flow projections for the next 90 days based on the activity from the rolling 12 months. My adjustments are biased, meaning, I exclude one time or other extraordinary items. We also use the cash flow to determine our term investments.

Florida Local Government Investment Trust Annual Florida Trust Seminar Excerpt Cash Forecast – shows that we are almost breakeven and only need to contribute bond payments. Thus, bond payments for the year are invested in term investments that mature on the bond payment dates. Description Amount Average Inflows (revenue sharing, deposits) $23.8 Million Average Outflows (not considering bond maturities and bond payments, considering check clearing) $20.3 Million

Florida Local Government Investment Trust Annual Florida Trust Seminar Liquidity – what is it? It is making sure there are sufficient funds to pay current liabilities Can we manage liquidity and make positive returns for our municipality Yes

Florida Local Government Investment Trust Annual Florida Trust Seminar By using the cash forecast and the specifics of how our municipality receives it funding. Example, from the cash forecast, we manage the: Bank balance in the operating bank account Investment balances in the investment pool accounts Bank balances in other money market accounts Term amounts to 365days

Florida Local Government Investment Trust Annual Florida Trust Seminar We received most of our funding in December and January of each fiscal year and from the previous slide you see that we do not have a short fall in an average month. In months where we have bond payments, pension contributions we will have a shortfall. Shortfalls are moved from the enhanced cash accounts

Florida Local Government Investment Trust Sample Active Management – slide 14 When the funds are received, they are immediately invested in four investment pools (for further analysis) Then, we still have treasuries earning less than 2%, thus, we review the maturities. We make an estimation of the maturities for the upcoming year, that portion of the current year inflows is invested in the long term portfolio if these investments can be invested in vehicles earning greater that the current MMF rate (link to investment strategy).

Florida Local Government Investment Trust Annual Florida Trust Seminar What is the end result? More than double our short term investment returns Increased our bond portfolio balance and coupon income by $500,000 per year

Florida Local Government Investment Trust Place 9 months of earnings and bond balance here 2018 Bond coupons $1.7 Million 2019 expected coupons $2.2 Million

Florida Local Government Investment Trust Florida Local Trust Seminar How do we work with other departments to achieve the returns? Accounts payable – we pay bills on the due date Payroll – reduced # of wires Procurement – we pay pcard on the due date and invest funds up to due date Started initiative to pay ACH, hopefully move to more innovative forms of payment in the future

Florida Local Government Investment Trust Annual Florida Trust Seminar Bank relationships – how do we use them Increase our MMF rates See what new tools are out there, focus on payment systems Cybersecurity Business Continuity (wires, vendor payments) Keeping abreast with technology

Florida Local Government Investment Trust Annual Florida Trust Seminar Economic indicators – how do we use them Update our investment strategy For example, if you believe the current Bloomberg indicator that there is a 35% chance of a downturn, then, where should you invest? If you also believe that we have a ‘crumbling’ infrastructure and coupled with the downturn prediction then, I update the strategy to buy defensive companies. Groceries, power grids (and possibly blockchain technology) On slide 14, I mentioned the budget for bond purchases, above is the strategy for purchasing these bonds.

Florida Local Government Investment Trust Annual Florida Trust Seminar Poll question How many of you use an investment strategy?

Florida Local Government Investment Trust Annual Florida Trust Seminar Sample of investment strategy, update at least quarterly Took the investment policy and along with market overview and S&P 500, came up with list of companies and I keep updating that list. Give an example here – Microsoft and Walmart

Florida Local Government Investment Trust Annual Florida Trust Seminar Reporting Issues Quarterly Discuss returns versus income with senior management Managing and discussing unrealized losses and gains (with the current drop we should be seeing gains) – should we sell or not

Florida Local Government Investment Trust Annual Florida Trust Seminar Survey of recent economic indicators – Bloomberg Discuss most recent trends What do I use – Inventories, currency strength, inflation, unemployment Currency strength – are our exports too expensive Are we seeing a pile up of inventories New unemployment claims Why important – for corporate bond purchases

Florida Local Government Investment Trust Annual Florida Trust Seminar Excerpt Bloomberg - ECO

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