9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 ...
-
Upload
shon-miller -
Category
Documents
-
view
215 -
download
1
Transcript of 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 ...
![Page 1: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/1.jpg)
9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 www.chandlerasset.com
CHANDLER ASSET MANAGEMENT
Developing A Plan:
Preliminary Inputs To The Investment Program
February 2006
CSMFO Annual Conference Kay Chandler, CFA
![Page 2: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/2.jpg)
2©2006. Chandler Asset Management, Inc.
The Cycle of Portfolio Management
Establish PolicyObjectives, Constraints
Evaluate Plan andExecution, Changes
Execute the Plan
Identify Strategies,Benchmarks
![Page 3: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/3.jpg)
3©2006. Chandler Asset Management, Inc.
Objectives + Constraints = Policy
Establish PolicyObjectives, Constraints
Evaluate Plan andExecution,Changes
Execute the Plan
Identify Strategies,Benchmarks
![Page 4: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/4.jpg)
4©2006. Chandler Asset Management, Inc.
Establishing Objectives
■ Safety—maintain appropriate level of exposure to risk
■ Liquidity
■ Sufficient short-term investments
■ Marketable securities
■ Targeted maturities
■ Extra layer
■ Yield (Return,Growth)
■ Income
■ Long-term growth
![Page 5: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/5.jpg)
5©2006. Chandler Asset Management, Inc.
Safety: The Relationship Between Risk and Return
Source: Index return information provided by Merrill Lynch
12/31/2005LAIF $1,525,924 4.32%
1-3 Year Treasury Benchmark $1,596,461 4.79%1-5 Year Government Benchmark $1,646,268 5.11%
Value on 12/31/2005 of $1 million invested 12/31/1995Annualized Return
Higher Duration Portfolios Offer Greater Returns Over Time
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
$1.60
$1.70
Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05
Growth in millions
LAIF
1-3 Year Treasury Benchmark
1-5 Year Government Benchmark
Market Risk
![Page 6: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/6.jpg)
6©2006. Chandler Asset Management, Inc.
Safety: The Relationship Between Risk and Return
Quarterly Change in Value
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05
Quarterly Total Rate of Return
Higher Duration Portfolios Have Greater Volatility of Return
Market Risk
![Page 7: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/7.jpg)
7©2006. Chandler Asset Management, Inc.
Safety: Assuming Credit Risk Can Improve Returns
■ Treasuries are the safest, considered to have ZERO credit risk
■ Federal agency securities considered next safest
■ AAA and AA
■ A
■ No credit research necessary
■ Monitor agency news, rating agency actions
■ Understand the business—risks and opportunities; monitor news and rating agency watch lists
■ With greater diligence--understand the business—risks and opportunities; monitor news and rating agency watch lists. Be quick to act on credit changes
…When resources are available to monitor credit quality appropriately.
![Page 8: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/8.jpg)
8©2006. Chandler Asset Management, Inc.
■ Liquidity risk (I)
1. The risk that the portfolio won’t provide adequate cashflow for the agency
■ Match maturities to known cash needs
■ Prepare cash flow forecasts
■ LAIF
■ Readily marketable securities
■ Extra layer of short-term investments
Liquidity: Having cash when you need it.
![Page 9: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/9.jpg)
9©2006. Chandler Asset Management, Inc.
■ Liquidity risk (II)
2. The risk that a security is not readily marketable, that is, can’t be sold, if necessary, at a good price
■ Often measured by the difference between the price at which you can buy (offer or ask) and the price at which you can sell (bid)
■ Treasuries, large agency issues, large corporate issues are most liquid
■ Small issue sizes, securities with unusual features, are least liquid
Liquidity: Having cash when you need it.
![Page 10: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/10.jpg)
10©2006. Chandler Asset Management, Inc.
Yield: Developing Investment Strategies
Establish PolicyObjectives, Constraints
Evaluate Plan and Execution,
Change
Execute the Plan
Identify Strategies,Benchmarks
![Page 11: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/11.jpg)
11©2006. Chandler Asset Management, Inc.
Total Portfolio
Liquidity Growth
Yield Strategy: Two components for Liquidity and Growth
■ Liquidity Component
■ Meets specific liquidity needs
■ Invests in short-term securities
■ Average maturity short
■ Very low volatility
■ Cash flow matching
■ LAIF
■ Growth Component
■ Targeted to highest suitable duration
■ Longer-term securities
■ Normally not used for liquidity, but invested in highly marketable securities, in case
■ Greater volatility
![Page 12: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/12.jpg)
12©2006. Chandler Asset Management, Inc.
Passive Management
■ Buy and Hold
■ Money is invested when it is available to a date when cash is needed.
■ There is no further activity with that investment, except for reinvestment of income
■ Maturity Ladder
■ Funds are invested in equal amounts to staggered maturity dates
■ When securities reach maturity, the funds are reinvested into the longest permitted maturity
![Page 13: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/13.jpg)
13©2006. Chandler Asset Management, Inc.
Active Portfolio Management
■ Creating and maintaining a portfolio structure with acceptable exposure to risk.
■ Striving to achieve a “better” return using one or more of the following strategies:
■ Duration management
■ Yield curve placement
■ Sector weighting decisions
■ Individual security selection
■ Timing
■ Relative to a chosen market benchmark, or to some other comparative measure
![Page 14: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/14.jpg)
14©2006. Chandler Asset Management, Inc.
Resource for Public Fund Investing in California
CALIFORNIA PUBLIC FUND
INVESTMENT PRIMER
Published by the State Treasurer
California Debt and Investment Advisory Commission
http://www.treasurer.ca.gov/cdiac/invest/primer.pdf
![Page 15: 9255 Towne Centre Drive | Suite 350 San Diego, CA 92121-3039 Phone 800.317.4747 | Fax 858.546.3741 Developing A Plan: Preliminary.](https://reader036.fdocuments.in/reader036/viewer/2022062517/56649f045503460f94c18a58/html5/thumbnails/15.jpg)
15©2006. Chandler Asset Management, Inc.
On to Plan Execution and Evaluation
Establish PolicyObjectives, Constraints
Evaluate Plan and Execution,
Change
Execute the Plan
Identify Strategies,Benchmarks