Portfolio Management Asset Management Group P R E S E N T E D B Y M. Corinne Larson, CTP Vice President (914)

Asset Management Group Investing in Today’s Market Develop a Plan: Investment Policy Cash Flow Forecasting Investment Strategies Execute the Plan: Investment Instruments Investment Options Spread Analysis Reevaluate the Plan: Benchmarks Portfolio Performance Portfolio Rebalance

Asset Management Group Importance of a Benchmark  Control risk in portfolio  Target expected returns  Establish accountability  Promote communication

Asset Management Group Characteristics of Benchmarks  Faithful to investment style and discipline it represents  Closely mirror the portfolio  Types of investments  Maturity limits  Active or passive management  Verifiable  Published  Easily calculated

Asset Management Group Choosing a Benchmark  Choose a security type  Come from appropriate industry or sector  Have a similar weighted average maturity or duration  Calculate one-month, six-month, and 12-month averages

Asset Management Group Choosing a Benchmark  Choose an index  Investable  Measurable  Repeatable  Consistent with portfolio guidelines

Asset Management Group Common Benchmarks  Standard & Poor’s LGIP Index  Public Investor 10-bill Performance Index  Constant Maturity Treasury Rates  3- and 6-months  1-, 2- and 5-years

Asset Management Group Treasury Yield Curve Rates

Asset Management Group Common Benchmarks  Merrill Lynch U.S. Treasury Indices  Salomon U.S. Treasury Benchmark Indices  Lehman Brothers Government Bond Indices  Merrill Lynch U.S. Corporates A-AAA

Asset Management Group Where to Find Benchmarks  Wall Street Journal  Barron’s  Bloomberg  Internet  GFOA’s Public Investor newsletter

Asset Management Group Portfolio Performance  Compare returns  Evaluate risk incurred to achieve returns  Determine if returns meet expectations  Reevaluate benchmark at least annually or when investment strategy changes

Asset Management Group How to Review Performance

Asset Management Group Portfolio Rebalancing  Evaluate  Compliance issues  Credit risk  Liquidity needs  Diversification  Market conditions  Interest rate risk  Investment strategies

Asset Management Group Portfolio Rebalancing  Diversify  Market sectors or issuers  Rate  Maturity  Match asset allocation goals and tolerance for risk  Adjust WAM for market conditions  Swap out of underperforming securities

Asset Management Group Putting It All Together  Establish the framework for investing  Understand investment alternatives  Develop cash flow forecasts  Develop investment strategies  Report investment results