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City hears annual investment report emphasizing safety-first portfolio and steady returns
Summary
PFM Asset Management presented the city—s annual investment report through Dec. 31, 2024, outlining a safety-first portfolio, a large U.S. Treasury allocation, and a one-year return that modestly outperformed the benchmark.
PFM Asset Management presented Palm Coast—s annual investment report to the City Council, describing a portfolio structured for safety, liquidity and then yield and reporting positive short-term returns.
The presentation: Helena Alves, the city—s financial services director, introduced Danny Metz and Leslie Weber from PFM Asset Management to review the portfolio performance through Dec. 31, 2024. Metz said the advisors— philosophy is "safety first, safety of principle," and emphasized that the city—s investment decisions follow state statute and public-fund best practices.
Why it matters: The council heard that the city keeps a large portion of its managed portfolio in U.S. Treasury securities to preserve principal and liquidity, and that the portfolio returned 4.42% for the one-year period, outperforming the policy benchmark by about 30 basis points. PFM reported the portfolio produced roughly $2.4 million in investment earnings during the year and about $7.3 million since the portfolio—s inception in 2017.
Details and context: PFM said the portfolio is deliberately weighted toward Treasuries (roughly 60%+ of the managed portfolio) because Treasuries are highly liquid and viewed as the lowest-risk asset for a municipal operating portfolio. Metz and Weber explained the advisors use a three-part framework: (1) compliance with state statute; (2) model language and recommended practices from the Association of Public Treasurers; and (3) Government Finance Officers Association (GFOA) best practices.
Weber described recent economic and yield developments and said the firm has moved the portfolio near benchmark duration given market uncertainties. The advisers noted spreads in corporate securities (used selectively to add yield) and reported the portfolio—s overall credit quality as high (roughly AA on agency charts). Metz told the council PFM—s near-term recommendation was to "hold and wait" amid Fed and macroeconomic uncertainty rather than make large tactical changes.
Operational notes: Council members asked how the advisors determine cash-flow needs and whether the managed portfolio includes every city fund. Metz and Alves reported that PFM models the city—s cashflow seasonality (including ad valorem cycles) and that the managed portfolio represents a large portion of the city—s investable cash; some short-term pools and statutory-restricted accounts are managed separately but are included in the city—s overall investment picture.
Next steps: PFM and staff said they will continue monthly and quarterly monitoring and return to the council for periodic updates; the advisers noted they may present again if market conditions warrant a tactical change.
Ending: Council members thanked PFM and finance staff for the review and for framing a conservative, liquidity-focused approach as the city begins its upcoming budget cycle.
