10-19-2021 Investment Strategy1,nvest
Progra
MR% bepartment
ERIE&6_n_ci1 Meeting
Questions to Answer
1. How much is investable?
2. What are the guiding principles?
I What are the purpose of our cash balances?
4. What is our strategy?
� 5. Can we expect improved yield?
How much is investable?
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
RE
City of Federal way
Cash Position Trend
U
4 0 0 -L 4 Q LL 4 4 Q 0 i 4
■Investments (yield) 0 LGIP (liquidity) ❑Checking (safety)
What Are The Guiding Principles?
Safety
Liquidity
Yield
What is the Purpose of Each Balance?
City of Federal way
Cash Position Trend
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
en
U
Q O 0 i < 4 Q 0 LL 4 4 Q 0 i 4
■ Iv estment (y iefd) ® L IP (liquidity) ❑ Chec k in g (safety)
Yield Curve — Time Value of Money
-o Checking
a�
Savings
0.31%
0.09
I nvest
0.56
6 m o 1 Yr 2 Yr 3 Yr 5 Yr
Time
Investment Policy Highlights
1. Safety and Liquidity - avoid risking principal
2. Treasuries and Agency Bonds (no stocks)
3. Highly regulated:
1. RCW Statutes
2. Public Deposit Protection Commission
3. Washington State Investment Board
4. Be transparent and accountable
What is Our Strategy?
Jan-
21
1,000,000
Feb-21
1,000,000
Mar-21
1,000,000
Apr-
21
1,000,000
May-
21
1,000,000
Jun-
21
1,000,000
J u I
-21
1,000,000
Aug-
21
1,000,000
Sep-21
1,000,000
Oct-21
1,000,000
Nov-
21
1,000,000
Dec-21
1,000 000
Jan-22
1,000,000
Feb-22
1,000,000
Mar- 22
1,000,000
Apr-22
1,000,000
May-22
1,000,000
Jun-22
1,000,000
J u I - 22
1,000,000
Aug-22
1,000,000
Sep-22
1,000,000
0 ct- 22
1,000,000
Nov- 22
1,000,000
Dec- 22
1,000,000
Ideally, one maturity per month
Jan-
23
1,000,000
Feb-23
1,000,000
Mar-23
1,000,000
Apr-
23
1,000,000
May-23
1,000,000
Jun-23
1,000,000
J u I -
23
1,000,000
Aug-
23
1,000,000
Sep-23
1,000,000
0 ct-
23
1,000,000
N ov-
23
1,000,000
Dec-23
1,000,000
Diversify Re -investment Risk
Eliminate predicting the market
Yield Expectations
1. Diversify purchases in low -yield environment
2. Disciplined, gradual improvement
3. Prioritize certainty
(buy and hold to maturity)
4. Expect rates to be cyclical
(tune in to economic forecasts)
�`�5. Shorter maturities until 3-year yields hit 2.5%
Yield Expectations
Current Investment Pool Balance
Principal $ 73,000,000 $ 1,000,000
Yield 0.07% 0.07%
Interest Income $ 511100 $ 700
Annualized Potential at Current Rates
Investment $ 36,000,000 $ 36,000,000
Yield 0.07% 0.40%
Interest Income $ 25,200 $ 144,000
Return on 20 minutes per month
Investment $ 1,000,000 $ 1,000,000
Yield 0.07% 0.40%
Interest Income $ 700 $ 4,000
Governance - What to Watch
✓Investment Policy — in place
✓Safekeeping Agreement — in place
✓Broker qualifications — checking, documenting
✓ Staff training
❑ Gradually increasing yields
❑ Monthly financial reports —anew section
i�,r ❑ Investment Policy update
City of Federal Way
Finance Department
An increasingly well -managed city