Receive and file the Yolo County Treasurer's Report on Investments for the quarter ended December 31, 2024. (No general fund impact) (Haynes/Sorensen)

Receive and file the Yolo County Treasurer's Report on Investments for the quarter ended December 31, 2024.

The County Treasury investment portfolio is summarized in Attachment A (Investment Summary) and includes the Treasurer's Investment Pool and the investment accounts managed by the Treasury that are not pooled together for investment returns. The pooled portfolio includes county funds, deposits from special districts, and school districts, totaling $1.071 billion as of December 31, 2024.  

The portfolio consisted of 1.1% ($12 million) in cash at the bank, 35.3% ($378 million) in short-term investments in government investment pools such as the Local Agency Investment Fund (LAIF) and the California Asset Management Program (CAMP), and 63.6% ($681 million) in an investment pool that is actively managed by the County’s investment advisor, PFM Asset Management, LLC (PFM). These investments consist mostly of fixed income securities as authorized by government code, such as: U.S. Treasuries; securities issued by federal agencies, such as Fannie Mae, Freddie Mac, and Federal Home Loan Bank; corporate notes; commercial paper; and certificates of deposit.

The investment details for the pooled portfolio along with the investment performance are shown in Attachment B (PFM Performance Report) while the non-pooled holdings are shown in Attachment C (Non-pooled Holdings).  The non-pooled portfolio of $128.1 million consists of specific investments for various entities and programs. These include $34.4 million in government medium-term funds (LAIF and CAMP) for various districts and the 2017 Lease Revenue Bonds, $28.1 million in investments managed by PFM for various county programs (Landfill Closure, Cache Creek, etc.), $65.4 million in section 115 trusts held by PARS for County OPEB (Other Post-Employment Benefits) and pension funding, and $97.3 thousand in cash in money market accounts.

In their quarterly investment review for the second quarter of 2025, PFM continues to monitor economic conditions and the Federal Reserve (Fed) activities. They noted that in its December 2024 meeting, the Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate target by 25 basis points. While the rate cut was well-received, markets were surprised by the anticipated slower pace of future rate cuts and the inflation outlook in the Fed's updated “dot plot” and economic projections. The new dot plot indicates only two anticipated rate cuts in 2025, down from four projected in September. This led to a sell-off in equities as markets interpreted the decision as signaling a longer period of higher yields and restrictive monetary policy. Moving forward, markets will closely monitor potential policies related to taxes, tariffs, regulation, and immigration following the election. Additionally, County staff successfully moved $200 million in excess liquidity from short-term investments to the county’s long-term portfolio in order to lock in higher rates, which may enhance future investment earnings as rates decline.

CASH BALANCES

Attachment D (Cash Balances) depicts the cash balances of the three major operating funds of the County and their combined balance. As of December 31, 2024, the unaudited balance was $25.2 million, which represents a decrease of $17.1 million from the prior quarter, partly due to net operating revenues and expenditures.

Other agencies with deposits in the pool include: school districts, special districts, and cities. A copy of the report is posted and available on the Department of Financial Services website. The Financial Oversight Committee reviews investment performance quarterly. All reports from the County's investment advisor, PFM Asset Management LLC, are available in the County Treasurer's office.