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

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

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 $863.7 million as of September 30, 2025.  

The portfolio consisted of 1.8% ($15.1 million) in cash at the bank, 16.3% ($140.5 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 82% ($708 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 Attachment B (PFM Performance Report) while the non-pooled holdings are shown in Attachment C (Non-pooled Holdings).  The non-pooled portfolio of $145.4 million consists of specific investments for various entities and programs. These include $37 million in government medium-term funds (LAIF and CAMP) for various districts and the 2017 Lease Revenue Bonds, $30.7 million in investments managed by PFM for various county programs (Landfill Closure, Cache Creek, etc.), $77.8 million in section 115 trusts held by PARS for County OPEB (Other Post-Employment Benefits) and pension funding, and $18.6 thousand in cash in money market accounts.

PFM noted that over the quarter, the financial markets stabilized as investors grew comfortable with the effects of a complex tariff rollout.  Despite the prevailing elevated effective import levy that is currently estimated to be near 18%, both equity and bond markets rebounded with steady consumer spending and business investment that supported investor sentiment about the economy.  Data did evidence a softening in labor as monthly net new job creation neared zero and unemployment rose slightly, but still well under its longer, historical average.  Inflation remained elevated, closer to 3% than the Federal Reserve’s 2% target, driven by rising goods prices and persistent services costs. With a downshift in labor and excess inflation, the Federal Reserve is negotiating its optimal response to manage its dual mandate that now appears to be in conflict.  The policy makers sided with caution in September by cutting its overnight benchmark rate by .25%, to 4.00%-4.25%, and revised its median outlook for two additional cuts before year-end.  The U.S. Treasury yield curve steepened across all tenors with the near-term markets outpacing the declines.  This led to positive returns across investment grade, fixed-income indices with corporate bonds and agency-backed mortgage securities leading gains for the period.

Cash Balances

Attachment D (Cash Balances) depicts the cash balances of the three major operating funds of the County and their combined balance. September 30, 2025, the unaudited balance was $53.3 million, which represents a decrease of $29.2 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.