Receive and file the Yolo County Treasurer's Report on Investments for the quarter ended June 30, 2025. (No general fund impact) (Haynes/Sorensen)

Receive and file the Yolo County Treasurer's Report on Investments for the quarter ended June 30, 2025.

The County Treasury investment portfolio is summarized in the Investment Summary (Attachment A) 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 $999.9 million as of June 30, 2025.  

The portfolio consisted of 1.5% ($14.7 million) in cash at the bank, 28.2% ($282.1 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 70.3% ($703.1 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 papers; and certificates of deposit.

The investment details for the pooled portfolio along with the investment performance are shown in the PFM Performance Report (Attachment B) while the non-pooled holdings are shown in the Non-pooled Holdings (Attachment C).  The non-pooled portfolio of $146.9 million consists of specific investments for various entities and programs. These include $44 million in government medium-term funds (LAIF and CAMP) for various districts and the 2017 Lease Revenue Bonds, $30.1 million in investments managed by PFM for various county programs (Landfill Closure, Cache Creek, etc.), $72.7 million in section 115 trusts held by PARS for County OPEB (Other Post-Employment Benefits) and pension funding, and $190 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. The second quarter was marked by significant market volatility driven by the unexpected rollout of large tariffs, which triggered the steepest market declines since the COVID pandemic before rebounding on improved trade negotiations and stable economic data. Inflation remained mild but is expected to rise in the second half of the year due to emerging tariff-related cost pressures. The labor market showed early signs of softening, with increased jobless claims and slower hiring, though reduced population growth may help keep unemployment steady. Consumer sentiment, while still subdued, improved modestly from April lows as trade talks progressed. The Fed held rates steady at 4.25%-4.50%, with future cuts likely depending on how tariffs impact inflation and growth. U.S. GDP turned negative in Q1 2025 due to a record-high trade deficit, though strong inventories and investment offered partial support. Treasury yields steepened as short-term rates fell and long-term rates rose, reflecting both rate cut expectations and fiscal concerns, while Treasury indices posted positive total returns across most maturities.
 

Cash Balances
Cash Balances (Attachment D) depicts the cash balances of the three major operating funds of the County and their combined balance. On June 30, 2025, the unaudited balance was $82.6 million, which represents an increase of $35.2 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.