PFM presents $31.1M portfolio, ESG rollout; managers may modestly extend duration
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Summary
PFM portfolio manager Justin Orsuolo reported a $31.1 million portfolio at year-end, quarterly interest earned near $309,000, and an ESG risk rating that moved slightly lower to 18.5; staff said ESG-policy implementation is effectively complete and future purchases will adhere to the policy.
Justin Orsuolo of PFM Asset Management presented the city’s quarterly investment report, summarizing market themes, portfolio performance and the new ESG reporting metrics. He told the committee the portfolio’s market value at Dec. 31 was roughly $31.1 million and that the portfolio outperformed its benchmark by about 10 basis points in the quarter and roughly 41 basis points year to date, noting an interest-earned figure near $309,000 for the quarter.
"The portfolio at 12/31 showed market value of 31.1 million dollars," Orsuolo said, and he described current portfolio characteristics: an effective duration near the two-year benchmark, a yield-at-cost of about 4.45% and a yield-at-market of about 3.85%. He said managers may modestly extend duration if the two-year Treasury stabilizes.
On recent activity, Orsuolo said the team purchased about $520,000 of asset-backed securities and roughly $2.7 million of U.S. Treasuries during the quarter and added corporate names with coupons up to about 4.85%. He characterized spreads as tight in the quarter but noted value in AAA auto asset-backed securities the team purchased.
The presentation included the first full quarter of ESG reporting under the city’s policy. Orsuolo said 51 of 55 non‑treasury issuers in the portfolio are now rated and that the portfolio’s ESG risk rating moved slightly lower to 18.5, leaving the portfolio in a "low ESG risk" category. Finance staff confirmed earlier sales were executed to remove holdings that were not in compliance with the ESG criteria and reported those sales settled without loss.
Committee members questioned concentration in bank holdings and the implications of extending duration. Orsuolo said bank exposure reflects frequent issuer activity and liquidity within the approved policy limits; he added that sales required by the ESG transition were done in advance of maturity and without realized loss.
On market risks, Orsuolo discussed possible Fed leadership changes, the timing of economic reports delayed by the federal shutdown, and tariff-related uncertainties; in response to a member question he cited a Yale Budget Lab analysis on tariffs' potential GDP and unemployment effects while noting the firm lacks exact data on consumption impacts.
Members thanked Orsuolo and staff for the update; the committee then received announcements and adjourned.