Thank you. Good afternoon, everybody. I'm calling to order the 5 p.m. meeting for the Audit Commission Investment Subcommittee today on August 22, of 2024. I want to thank Adrian Henson for attending a lieu of Gerard Elmortay. So thank you, Adrian, for attending this. So we could have the meeting. Next, agenda item is a roll call. So, Adrian Henson, President. John Wendy, President. Next is the Pledge of Allegiance, which I will lead on this one. How do you begin? I pledge allegiance to flag the United States of America and to their public origin stands I see there's no presentations at the moment. Next on the agenda is, is there any public input? We have not received any public input for this meeting. Okay, thank you. Next for order of regular business. First item is the approval of minutes for the July 11th, 2024 meeting. Do I hear a motion to approve? Move to approve. Second. Any discussion on it? All right. We'll called votes. Adrian. Hansen. Approver. Approve. Yeah, my child Wendy. Approve. Next on the agenda item is for regular businesses. The review of the July 2024 Investment Report and we want to welcome Jenny Linkowitz from Chandler Asset Management. So good to see you again and how about it? Good evening. Nice to see you as well. Good evening, commissioners, staff, members of the public. Thank you for inviting me here tonight to talk about the city's July 31st investment report. So with that, I'll go ahead and share my screen. We have a presentation here this evening. And just taking a look and kicking an off as usual with a brief economic update, we've had a lot that's happened since the last time I presented. We've had a lot of volatility in the market. It was led by a worse than expected employment report for July, and that caused treasuries to rally. We also had some geopolitical events going on in concerns. And then we also had a flight to quality that happened in early August as a result of the bank in Japan raising interest rates for the first time in a long time and causing some yin carry trade unwinds to happen. So people borrowing at very low interest rates in Japan and investing in the US stock market particularly tech. And that's a leverage trade so it caused a pretty big rally in the market and a lot of volatility for a few days as that is that unwound. We also had a bed meeting at the end of July and as expected they left policy rates unchanged with short term rates at very high levels five and a quarter or five and a half so still very restrictive territory for that. But they did telegraph that they would likely be looking to cut rates at a future meeting, probably in the September 18th meeting. So we'll be looking for that. In addition to that, we're going to be watching Jackson Hole, the meeting that started today and goes through Friday. And particularly on Friday, Jerome Powell is going to be giving a speech. So the market is going to be paying very close attention to that for any indicators on Friday morning. Well, the case for a Fed rate cut has really been helped out a little bit by the employment picture. As you can see, non-front payrolls have been trending lower. And as I mentioned, we had that worse than expected, non-front payroll number in July of only 114,000 jobs added. So it's still positive, but it's below expectations and below trend. And in addition to that, we also had another event happen where the BLS, the Bureau of Labor Statistics, made an adjustment for the whole year of negative 818,000 jobs. So that basically was overstating jobs on a monthly basis from 242,000 a month to about 174,000 per month. So that indicates that the labor market may have been weaker than previously thought. But we are still seeing pretty low unemployment rates. Generally speaking, it didn't take up to 4.3% for the month of July. For Orange County, you're very close to that. For June, it was about 4%. So you still got a strong labor market in your neck of the woods as well. And then we saw average hourly earnings eased down to 3.6% year-over-year for July. So average hourly earnings is obviously a very important component into inflation as we have wages going up at, you know, about 3.6% per year. That's higher than we've seen in some time. But the CPI has actually been moderating over time. We did see it ticked down to 2.9% year over year for July. So we're still above the feds 2% target, but we're getting closer to where they'd like to be. And the trend, as you can see, is certainly moving lower. We're still seeing shelter costs contributing quite a bit. But some things like gasoline prices on a year over your basis are lower. still seeing shelter costs contributing quite a bit. But some things like gasoline prices on a year over your basis are lower. And so that helps ease inflation a little bit. In the LA area, you had 3.4% inflation year over year for the Orange County area. And then looking at core PCE, the Fed's preferred metric on the right, that was a little delayed, but 2.6% year over year, and we'll be looking for an update on that. So just a little bit above the desired 2% target for inflation. And then looking at what the Federal Reserve is up to, they're still unwinding their balance sheet, that's unchanged. And then they're also expected to cut rates by about, the bond market has about four quarter point rate cuts priced into the market for the rest of 2024. Chandler's view is that they're more likely to do two or three unless there's a compelling reason to do more. It seems like they're looking to do things at a measured pace. Up until now, a lot of the Fed speakers have been indicating more hawkish that they are can still concern that inflation could come back. But we do think that they are at a point now seeing some weakness in the labor market and inflation moderating. We think that they're at a point where they're ready to start easing there. And then looking at bond yields, you know, since this is printing, we've seen yields drop below 4% for much of the curve. We have the two years sitting at about 4% that the five year treasury at about 3.7% and then the 10 years about 3.85%. So we're starting to see yields dip down a little bit as is expected when the Fed is expected to lower rates. The yield curve inversion is still in place, but they actually went away for a brief period of time during the flight to quality that happened. And we're currently looking at a difference of about 0.15% between the tenure and the two year. So we're still seeing the two year a little bit higher than the tenure indicative of possible recession. No, we're obviously expecting that there's a high probability of a soft landing, but there's obviously always a chance that there could be, you know, a more severe type recession. So we'll be watching that very closely and and that yield curve has been inverted for over two years. So that's a record amount of time that we've been sitting in that situation. So in order for it to uninvert, we're probably going to have to have the fed start cutting rates. So we'll be looking for this curve to normalize over the next six months or so as we start to see those rate cuts. Bring the short term rates down lower. And then looking at the portfolio and the impact that this has all had, we obviously are investing in very conservative securities to keep the city's money invested according to the objectives of safety, liquidity, and return. And we're investing according to the Bank of America, one to five US Treasury and Agency index. And we invest in fixed income securities that comply with your policy and also California law. So we have a compliance report that shows that the portfolio is in compliance as of the end of July It has adequate funds for six months And then taking a look at a snapshot of the portfolio. This is a consolidated view that includes both the Chamber of Managed Portfolios Which are a little over a hundred million dollars total and then also funds that are managed by city staff So the total amount as of the end of July was about $190 million. So this time of year we typically see a drop in liquidity because there typically aren't a lot of tax receipts this time of year so we tend to see it kind of a dry spell and funds start to go out in the summer months and into early fall. So we saw about $12 million, looks like it went lower in terms of market value. We still have a very overall, very short profile as far as the portfolio. So it's about 7th, 10th of a year duration. The purchase yield is pretty high, it's 4.26%. We did see the market yield come down pretty markedly over the past month. It went from 513 down to 4.9 so we're seeing that kind of moderate a little bit and you're kind of looking at the types of investments we're buying. It's about 47% invested in camp and life and other types of liquidity vehicles like money market funds. And we also have about a third of the portfolio, 33% in government securities, treasuries, agencies, and the like. And then we have about 19% total invested in high quality corporate bonds and commercial papers. So it's a very conservative portfolio overall. Returns have been really over the last year. You can see there were an excess of 5%. So we really, as rates came lower at the end of July, we saw that really bring up the total return for the portfolio over the past few months. So since inception, we've had returns of about 1.08% on an annualized basis. And this is for about three and a half years that we've been managing the portfolio overall. And then obviously like over the past three months for that return, we've been beating the benchmark for all the periods except for the most recent. And the reason for that is because the portfolio, particularly on a consolidated basis, is significantly shorter than the benchmark. The benchmark has a duration of about 2.6. And this consolidated portfolio, you can see has a lot of liquidity and it's less than a year. So that's the reason you know obviously when we had the last couple years with interest rates rising it was to the benefit to be short but but now we're going to see that kind of as rates come down we'll see the opposite effect. Now looking at the maturity distribution, obviously we have a lot about over half the portfolio is invested very short term, three months or less. When we've been doing new purchases and strategies for the five-year strategy, we've been focusing on this four to five-year bucket, and we've purchased a couple of high-quality corporates as well as a Freddie K security, which is an agency. And then for the liquidity strategy, we've been focusing on this six months to a year bucket, because we have a one-year maximum for that particular strategy. And then looking at the champs, I managed one to five portfolio. For this one, we saw the market value increased by about 778,000 over the course of the month, mostly because of income moving higher, but also because of that move in Treasury rates lower that caused the value of the securities in this portfolio to go up. So we've got a modified duration here of 1.84, so about 70% of its benchmark. We're looking to get this closer to neutral, particularly as rates start to go down. We did do some investments in the month of August. We took some money from the liquidity portfolio that was moved over to this portfolio to invest a little bit longer term and start to shift some assets out a little bit longer. We did say the purchase yield of this go to 2.9% and the market yield fell to 4.77%. So for this portfolio, excuse me, we're also seeing good performance going back to late 2020. We had annualized return of 1.08 percent on a realized basis 2.25 percent. So you can see we've been well over the benchmark of the 1 to 5 by over 1 percent. It's been beating and a lot of that due to five by over one percent has been beating. And a lot of that due to the duration difference obviously. But we also have a more diversified portfolio and we're buying longer term securities in this strategy. And so it's about half pardon me. I think I went to the wrong slide here. Let me, let me, this is the, this is the Chandler Manage portfolio. So we've been outperforming by about 92 basis points on an annualized basis and about 100 basis points for every three years. And the realized returns, of course, have been over 2% for all the periods one year longer. So this also has very good performance. And I just want to point out that this portfolio is about half invested in corporates and commercial paper or CDs, that kind of thing. And then half invested in high-quality, US government securities like Treasury's and agencies. So I'm very conservative portfolio overall. And we'll look at some of the issuers that we've been investing in as well. And so we did add a couple of names to the strategy. We bought some Pepsi and some BlackRock over the course of the month and also some Freddie K's securities. So we did add a few names that looked attractive. And it was before Rates fell as drastically as they did in August. So that was good. And then looking at the holdings. And then we have a page that shows transactions. And I kind of want to look at these for, I mean, just to show you this middle column here has the purchase yield. So you can kind of see what we were able to purchase before rates fell in August even more. And you can see we were able to get anywhere from 4.5% all the way up to over 5%. Some of these purchases were in the liquidity portfolio like the Toyota commercial paper and the Treasury. So those were like six to 12 month investments and then the PEPC, the BlackRock and the Freddie K, were all right around 4.5% roughly for those investments and those were in the four to five year bucket. So we're trying to extend that portfolio to lock in these higher yields for longer term. Okay, so with that that concludes my presentation. I'd be happy to take your questions. Any questions, Adrian? Good, thank you. No questions from us, Jenny. Thank you very much. A very comprehensive overview as usual. So I appreciate that. Thank you. Yeah, so I can say thank you. I'm great rest of your evening. Thank you. Thank you. Thank you. Let me see if I can un-share this. Yeah, no worries. Moving on to the next item. Actually call for a motion to prove the investment report that Jenny just presented to us. So ask for a motion to approve. Move to approve. I'll second that. Adrian Henson. approve. John Wendy approve. Motion passes. Next item of order is any committee or staff comments? No comments from staff. All right, easy enough. With that being said and or with nothing else to say I should say. I'll call for the adjournment of the meeting. The next meeting of the Investment Subcommittee is scheduled for Thursday, September 26th, 2024 at 5 p.m., and close out the meeting at 5.15 p.m. today. Thank you very much everybody.