Investment manager Justin: town portfolio outperformed benchmark modestly; recommends cautious duration extension

Justin, the town’s external investment manager, told the Finance & Investment Committee that the town’s portfolio performed well during the quarter ended Dec. 31 and that modest extension of duration could be appropriate if short-term rates normalize.

Justin said recent macro data — including unemployment around 4.3% and personal consumption expenditures near 2.9% — argue for a cautious posture. “I would say one rate cut is certainly in the cards,” he said, adding that many market participants expect multiple cuts but that timing is uncertain. He identified the two‑year portion of the curve as a relatively stable pocket and said the portfolio could be extended modestly to roughly 108–110% of its benchmark duration if conditions support it.

On portfolio activity, Justin reported purchases of about $2,300,000 in U.S. Treasuries, roughly $740,000 in corporate bonds (including issuers such as Shell and Novartis), and approximately $250,000 in agency commercial mortgage‑backed securities. He said the portfolio generated about $193,000 in interest during the three‑month period and $72,000 in realized market value gains, for total returns near $266,000; the quarterly return annualizes to a positive performance and outperformed the benchmark by a few basis points.

Justin emphasized credit quality: roughly 80% of holdings were rated double‑A or higher, with a small portion rated by Fitch or Moody’s but not S&P. He said the investment team maintains internal credit analysis and does not rely solely on external ratings.

Committee members asked about the tradeoff of extending duration if markets price in more aggressive Fed easing. Justin replied the team is monitoring the yield curve and would pivot if data materially changes. The presentation concluded with a commit to provide additional slide detail and follow up at the next quarterly meeting.