Milford finance committee hears PFM portfolio review; city expects roughly $1.5 million in FY26 investment earnings

Marty Hammond, managing director at PFMAM, briefed the Milford Finance and Audit Committee on the city’s quarterly investment performance and the firm’s review of the municipality’s investment policy.

The presentation said the committee’s main cash portfolio had a market value of about $36.1 million as of 03/31/2025, a portfolio duration of about 1.85 years and a yield-at-cost of roughly 4.41% (current yield about 4.48%). PFM reported the portfolio returned about 1.73% for the quarter (market-value gain of about $332,000) and that over the prior 12 months the portfolio has delivered roughly in the mid‑single digits annualized (PFM gave a ballpark estimate in the meeting of about 5.5%–6% over the last year).

The quarter’s gain came primarily from falling Treasury yields, which increased market values, Hammond told the committee. "It was a phenomenal quarter across the board for fixed income investors," he said. Hammond added that the portfolio was positioned slightly shorter than the benchmark (about 90%–91% of the benchmark duration), which cost the portfolio roughly eight basis points of relative performance for the quarter but had provided downside protection in previous periods when yields rose.

Lou Vitola, Milford Finance Department, told the committee that Zack O'Grady has left PFM and that Marty Hammond would lead PFM’s presentations in the interim. Vitola said the city’s next cash‑flow and income projection — timed to the FY26 budget process — had just been received and will be incorporated into regular quarterly reports. Vitola and PFM said the updated projection is already reflected in the fiscal 2026 budget and that the current estimate for investment earnings included in that budget is about $1.5 million.

PFM also described sector and liquidity positioning: roughly 24% of the portfolio was in U.S. Treasuries, a little over one‑third of assets were in the 0–1 year bucket for liquidity and opportunity, and about 9% was in asset‑backed securities that reset quarterly. A separate $4 million laddered portfolio that was managed to match liabilities was reported separately; its effective duration was about 3.37 years with a higher yield‑at‑cost (about 4.64%).

Committee members asked about forward expectations. Hammond said, absent unforeseen shocks, the firm expected yields to be lower on average over the coming 12 months (which would lift market values) and reiterated an expectation of roughly 4%–4.5% annualized earnings over the next few years. He cautioned that a recession remains a nonzero possibility and that short‑term market moves could be volatile.

On valuation methodology, Hammond explained that occasional small differences can appear between PFM’s prices and the city’s custodian because some fixed‑income issues have limited trading prices and independent pricing services may use proxy or model prices. He characterized such differences as not material for Milford’s reporting.

The committee heard that the city’s investment policy is under annual review by staff and PFM; any recommended changes will be presented at the July quarterly meeting. PFM said it will return in person for the next scheduled quarterly briefing.

Ending: The committee offered no formal action at the meeting; staff will incorporate PFM’s updated cash‑flow and earnings projection into the FY26 budget and continue the annual investment policy review ahead of the July report.