HomeMy WebLinkAbout97.PPP Investment PerformanceCHANDLER ASSET MANAGEMENT, INC. | 800.317.4747 | www.chandlerasset.com
INVESTMENT REPORT
Period Ending December 31, 2018
Orange County Sanitation District
2
SECTION 1 Firm Overview
SECTION 2 Economic Update
SECTION 3 Account Profile
Table of Contents As of December 31, 2018
SECTION |Section 1 |Firm Overview
4
Specializing in Investment Management for Public Agencies
Assets Under Management
$16.6 Billion
Chandler Asset Management Assets as of December 31, 2018.
California Based, Independent & Employee-Owned
•Fixed income specialist since 1988
•Founded by public investment professionals
•Headquartered in San Diego
Custom Investment Programs
•Investment solutions built upon California
Government Code; Safety, Liquidity, Return
•Investment solutions that incorporate our Client’s
risk profile and return goals
•Strategies for operating and project funds, bond-
proceeds and reserves, and OPEB trusts
•Proprietary investment analysis
Stable Team of Investment Professionals
•Team of investment professionals average over
21 years portfolio management experience
•Disciplined investment philosophy and
repeatable process
•Direct contact with investment management team
“We believe if we do what is right for our clients, our own success will follow.”
Corporate
<1%
Hospital
17%
Non-Profit
<1%
Sub-Advisory
2%
Public Agency
80%
5
Lasting Partnerships with Neighbors and Peers
Local Water District, Sanitation District,
and Utilities Clients
Client Name Managed
Since
East Orange County Water District 2016
Elsinore Valley Municipal Water District 2017
Moulton Niguel Water District 1995
Orange County Sanitation District 2014
Rancho California Water District 1996
San Bernardino Municipal Water Department 2013
South Coast Water District 2015
San Diego County Water Authority 2014
Temescal Valley Water District 2016
Three Valleys Municipal Water District 2009
Upper San Gabriel Valley Municipal Water District 2014
Vallecitos Water District 2018
Walnut Valley Water District 2009
Western Municipal Water District 2001
Neighboring Public Agency Clients
Client Name Managed
Since
City of Brea 1996
City of Buena Park 2005
City of Costa Mesa 2013
East Orange County Water District 2016
City of Fountain Valley 2015
City of Irvine EBT 2018
City of La Habra 1999
Moulton Niguel Water District 1995
City of Newport Beach 1991
Orange County Sanitation District 2014
Orange County Transportation Authority 2018
City of San Clemente 2013
City of San Juan Capistrano 2018
South Coast Water District 2015
Transportation Corridor Agencies 2014
City of Westminster 2015
Chandler’s water agency clients and sampleInland Empire area clients as of December 31,2018.Both lists only include clientsthat have given permission tobe listed.It is not known whether the clients
listed approve or disapprove of Chandler Asset Management and the advisory services provided.Includes discretionary and non-discretionary relationships.
6
Our Experienced Team is a Resource for the District
Investment Professionals Responsibility Industry Experience Firm Tenure
Martin Cassell, CFA
CEO, Chief Investment Officer Leads the investment team, firm oversight 1987 1991
Jayson Schmitt, CFA
EVP,Portfolio Manager
Implements portfolio strategies, credit analysis and head of Quantitative Analysis Committee and Economic and Market Analysis Committee 1994 1995
Ted Piorkowski, CFA
SVP, Portfolio Manager
Implements portfolio strategies, credit analysis and head of Sector Committee 1987 1999
William Dennehy II, CFA
EVP,Portfolio Manager Implements portfolio strategies, credit analysis and head of Credit Committee 1992 2011
Scott Prickett, CTP
EVP, Portfolio Strategist
Implements portfolio strategies, monitors alignment with client objectives and policies and head of Portfolio Strategy 1987 2014
Jeff Probst, CFA
VP, Portfolio Manager Implements portfolio strategies and credit analysis 2010 2012
Genny Lynkiewicz, CFA
VP, Portfolio Manager Implements portfolio strategies and credit analysis 2000 2015
Julie Hughes
SVP, Portfolio Strategist
Implements portfolio strategies and monitors alignment with client objectives and policies 1993 2014
Carlos Oblites
SVP, Portfolio Strategist
Implements portfolio strategies and monitors alignment with client objectives
and policies 1995 2017
Shelly Henbest, CFA
VP, Credit Analyst Research and credit analysis 2000 2009
Devin Weinstein
Portfolio Management Associate Assists with implementation of portfolio strategies 2015 2018
Client Service and Operations Responsibility Industry Experience Firm Tenure
Kay Chandler, CFA
Chair of the Board,Founder Strategic planning and client service 1975 1988
Don Penner
EVP, Director of Business Development Leads the client service, marketing and relationship management team 2001 2010
Mia Corral Brown
SVP, Relationship Manager Client service and relationship management 1997 2004
Jeannie Palmero
VP, Client Service Client service manager 1994 2007
Nicole Dragoo, IACCP
COO, Chief Compliance Officer
Responsible for regulatory compliance, directly manages investment operations
and oversees firm’s administrative functions 2000 2001
Section 2|SECTION |Section 2 |Economic Update
8
U.S.payrolls rose by 312,000 in December,well above the consensus forecast of 184,000.October and November payrolls were revised up by a
total of 58,000.On a trailing 3-month and 6-month basis payrolls increased by an average of 254,000 and 222,000 per month,respectively,more
than enough to absorb new entrants into the labor market.The unemployment rate increased to 3.9%in December from 3.7%in November as
the labor participation rate increased to 63.1%from 62.9%.A broader measure of unemployment called the U-6,which includes those who are
marginally attached to the labor force and employed part time for economic reasons,was unchanged at 7.6%.Wages jumped 0.4%in December
on a month-over-month basis,exceeding expectations of 0.3%.Wages were up 3.2%on a year-over-year basis in December,versus up 3.1%
year-over-year in November. The average workweek increased to 34.5 hours in December from 34.4 hours in November.
Source: US Department of Labor Source: US Department of Labor
0
50
100
150
200
250
300
350
MO
M
C
h
a
n
g
e
I
n
(
0
0
0
'
s
)
Nonfarm Payroll (000's)
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
Unemployment Rate
Underemployment Rate (U6)
Unemployment Rate (U3)
Ra
t
e
(
%
)
Employment
9
The Consumer Price Index (CPI)was up just 1.9%year-over-year in December,versus up 2.2%year-over-year in November,as energy prices
pulled down the index month-over-month.Core CPI (CPI less food and energy)was up 2.2%year-over-year in December,unchanged on a year-
over-year basis from November.The Personal Consumption Expenditures (PCE)index was up 1.8%year-over-year in November,versus up 2.0%
year-over-year in October.Core PCE (excluding food and energy)was up 1.9%on a year-over-year basis in November,versus up 1.8%in
October. Core PCE inflation, which is the Fed's primary inflation gauge remains below the Fed’s 2.0% target.
Source: US Department of Labor Source: US Department of Commerce
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Consumer Price Index (CPI)
CPI YOY % Change
Core CPI YOY % Change
YO
Y
(
%
)
C
h
a
n
g
e
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Personal Consumption Expenditures (PCE)
PCE Price Deflator YOY % Change
PCE Core Deflator YOY % Change
YO
Y
(
%
)
C
h
a
n
g
e
Inflation
10
Third quarter GDP grew at an annualized rate of 3.4%(revised down slightly from the second estimate of 3.5%).This follows growth of 4.2%in
the second quarter.Inventories and consumer spending drove growth in the third quarter,while net exports were a drag.The consensus
forecast calls for GDP growth of 2.6% in the fourth quarter of 2018, 2.1% in the current quarter, and 2.5% for the full year 2019.
Source: US Department of Commerce Source: US Department of Commerce
12/17 3/18 6/18 9/18
2.6%0.4%2.6%2.4%
0.1%1.6%-0.1%2.5%
-0.9%0.0%1.2%-2.0%
0.3%0.2%0.2%0.2%
0.2%0.1%0.2%0.2%
2.3%2.2%4.2%3.4%
Net Exports and Imports
Personal Consumption Expenditures
Gross Private Domestic Investment
Federal Government Expenditures
State and Local (Consumption and
Gross Investment)
Components of GDP
Total
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Gross Domestic Product (GDP)
GDP QOQ % Change
GDP YOY % Change
Gross Domestic Product (GDP)
11
Source: Bloomberg
On a year-over-year basis,Treasury yields have increased and the Treasury yield curve has flattened.The spread between 2-Year and 10-year
Treasury yields narrowed from 52 basis points to 20 basis points in 2018.Rate hikes by the Federal Reserve have put upward pressure on rates,
while supply and demand imbalances,technical factors,weakening global economic growth,and subdued inflation expectations have
contributed to the curve flattening.
Source: Bloomberg
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
US Treasury Note Yields
2-Year
5-Year
10-Year
Yi
e
l
d
(
%
)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
US Treasury Yield Curve
Dec-18
Sep-18
Dec-17
Yi
e
l
d
(
%
)
Bond Yields
SECTION |Section 3 |Account Profile
13
Objectives
Chandler Asset Management Performance Objective
Liquid Operating Monies –will be compared to the 3-month T-Bill rate and operate with a maximum
maturity of one year.
Long-Term Operating Monies –will be compared to the ICE BAML 1-5 Year Corporate Government Rated
AAA –A Index.
Investment Objectives
The investment objectives of the Orange County Sanitation District are first,to provide safety of principal
to ensure the preservation of capital in the overall portfolio;second,to provide sufficient liquidity to meet
all operating requirements;and third,to earn a commensurate rate of return consistent with the
constraints imposed by the safety and liquidity objectives.
Strategy
In order to achieve these objectives,the portfolio invests in high quality fixed income securities consistent
with the investment policy and California Government Code.
As of December 31, 2018
14
Category Standard Comment
Treasury Issues 5 years maxmaturity; Minimum allocation of 10%Complies*
U.S. Agencies 20% max issuer; 5 years max maturity Complies
Supranational "AA" rated or better by a NRSRO; 30% maximum; 5 years max maturity; USD denominated senior unsecured
unsubordinated obligations issued or unconditionally guaranteed by IBRD, IFC, or IADB Complies
Corporate (MTNs)"A" rated or better long term debt by a NRSRO; 30% maximum; 5% max issuer; 5 years max maturity; Issued by
corporations organized and operating within the U.S. or issued by depository institutions licensed by the U.S.Complied at time of purchase**
Municipal Securities "A" rated or higher by a NRSRO; 10% maximum; 5% max issuer; 5 years max maturity Complies
Asset Backed/ CMOs/ Mortgage-backed "AA" rated or better by a NRSRO; "A" or higher issuer rating by a NRSRO; 20% maximum; 5% max issuer (excluding
govt agency/mbs); 5 years max maturity Complies*
Negotiable CDs "A" rated or better long term debt by a NRSRO; or "A-1"/ highest short term rating by a NRSRO; 30% maximum; 5% max
issuer; 5 years max maturity Complies
Certificates of Deposit 5% max issuer; 5 years max maturity; Secured/ collateralized Complies
Banker’s Acceptances A-1 rated or equivalent short term rating by a NRSRO; 40% maximum; 5% max issuer; 180 days max maturity Complies
Commercial Paper
A-1 rated or equivalent short term rating by a NRSRO; "A" or better long term debt issuer by a NRSRO; Issued by a
domestic corporation organized and operating in the US with AUM > $500million; 25% maximum; 5% max issuer;
270 days max maturity
Complies
Mutual Fund & Money Market Mutual
Fund
Highest rating or "AAA" rated by two NRSROs; SEC registered adviser with AUM >$500 million and experience greater
than 5 years; 10% per one Mutual Fund; 20% max per issuer on Money Market Mutual Funds; 20% max of the
District's surplus money
Complies
Repurchase Agreements 102% collateralization Complies
Reverse Repurchase Agreements 5% maximum, 90 days max maturity Complies
LAIF Not used by investment adviser Complies
OCIP Not used by investment adviser Complies
Avg Duration Not to exceed 60 months - (80% to 120% of the benchmark)Complies
Max Per Issuer 5% of portfolio (except Supranationals, U.S. Government, Agencies, Mutual Fund)Complies
Maximum Maturity 5 years maximum maturity Complies*
Orange County Sanitation District Long Term
Assets managed by Chandler Asset Management are in full compliance with state law and with the investment policy
*The portfolio has twenty-one (21) securities with maturities greater than 5 years including four (4) CMOs, sixteen (16) MBS and one (1) treasury. All securities were inherited from the previous manager
and complied at time of purchase.
**GE (36962G7M0) was downgraded by Moody's (Baa1) and S&P (BBB+) in October 2018 and by Fitch (BBB+) in November 2018; complied at time of purchase.
Compliance As of December 31, 2018
15
Portfolio Characteristics
Orange County Sanitation District Long Term
12/31/2018 9/30/2018
Benchmark*Portfolio Portfolio
Average Maturity (yrs)2.68 2.60 2.74
Average Modified Duration 2.53 2.27 2.37
Average Purchase Yield n/a 2.27%2.18%
Average Market Yield 2.69%2.70%2.85%
Average Quality**AAA AA/Aa2 AA/Aa1
Total Market Value 498,783,575 462,099,738
*ICE BAML 1-5 Yr US Corp/Govt Rated AAA-A Index **Benchmark is a blended rating of S&P, Moody’s, and Fitch. Portfolio is S&P and Moody’s respectively.
A diversified mix of securities were purchased during the quarter across the Treasury, Agency, Supranational, Asset
Backed, Commercial Paper and Corporate sectors of the market to keep the asset allocation of the strategy consistent
with Chandler objectives. The purchased securities ranged in maturity from January 2019 to December 2023. A $30.4
million contribution into the portfolio late in the year was partially invested in short maturity notes to await more liquid
markets in the beginning of the year.
As of December 31, 2018
16
Orange County Sanitation District Long Term
Sector Distribution
ABS8.0%
Agency23.0%
CMO
0.4%
Commercial Paper
1.8%
Foreign Corporate
0.9%
Money Market Fund FI2.3%
Mortgage Pass
Thru
0.3%Municipal Bonds
0.9%
Supranational
8.5%
US Corporate
22.6%
US Treasury
31.3%
December 31, 2018 September 30, 2018
ABS
9.0%
Agency23.5%
CMO
0.5%
Commercial Paper2.0%
Foreign Corporate1.0%
Money Market
Fund FI
2.1%Mortgage Pass
Thru
0.3%Municipal Bonds
1.0%
Supranational
6.9%
US Corporate
21.6%
US Treasury32.3%
As of December 31, 2018
The sector allocation was relatively stable. Some of the modest changes include increases in the Corporate and
Supranational allocations offset by declines in the Treasury and Asset Backed allocations.
17
Issue Name Investment Type % Portfolio
Government of United States US Treasury 31.29%Federal National Mortgage Association Agency 8.53%
Federal Home Loan Bank Agency 8.41%
Federal Home Loan Mortgage Corp Agency 6.02%
Intl Bank Recon and Development Supranational 3.99%Inter-American Dev Bank Supranational 3.46%First American Govt Obligation Fund Class-Z Money Market Fund FI 2.29%
Honda ABS ABS 2.28%
John Deere ABS ABS 2.02%
MUFG Bank Ltd/NY Commercial Paper 1.80%Nissan ABS ABS 1.68%Wells Fargo Corp US Corporate 1.59%
Honda Motor Corporation US Corporate 1.38%
Berkshire Hathaway US Corporate 1.30%
Deere & Company US Corporate 1.26%American Express ABS ABS 1.24%Chubb Corporation US Corporate 1.23%
Bank of New York US Corporate 1.22%
PNC Financial Services Group US Corporate 1.20%
ChevronTexaco Corp US Corporate 1.19%JP Morgan Chase & Co US Corporate 1.17%IBM Corp US Corporate 1.13%
International Finance Corp Supranational 1.08%
General Electric Co US Corporate 1.00%
US Bancorp US Corporate 1.00%Qualcomm Inc US Corporate 0.99%HSBC Holdings PLC Foreign Corporate 0.89%
Eli Lilly & Co US Corporate 0.80%
Apple Inc US Corporate 0.80%
Toyota ABS ABS 0.79%Wal-Mart Stores US Corporate 0.79%Occidental Petroleum Corporation US Corporate 0.66%
General Dynamics Corp US Corporate 0.64%
Morgan Stanley US Corporate 0.60%
Exxon Mobil Corp US Corporate 0.60%Microsoft US Corporate 0.60%Oracle Corp US Corporate 0.59%
Port Authority of New York and New Jersey Municipal Bonds 0.50%
Issuers
Orange County Sanitation District Long Term –Account #10268
As of December 31, 2018
18
Issue Name Investment Type % Portfolio
HSBC Holdings PLC US Corporate 0.50%Merck & Company US Corporate 0.40%
Federal Home Loan Mortgage Corp CMO 0.36%
New York City Transitional Finance Authority Municipal Bonds 0.29%
Federal National Mortgage Association Mortgage Pass Thru 0.24%University of California Municipal Bonds 0.08%Federal National Mortgage Association CMO 0.04%
GNMA Mortgage Pass Thru 0.03%
AMRESCO Residental Securities Corp CMO 0.03%
SLM Corp ABS 0.01%Small Business Administration ABS 0.00%Federal Home Loan Mortgage Corp Mortgage Pass Thru 0.00%
TOTAL 100.00%
Issuers
Orange County Sanitation District Long Term –Account #10268
As of December 31, 2018
19
AAA AA A <A NR
12/31/18 12.8%62.8%13.9%1.6%9.0%
09/30/18 11.6%63.8%14.5%0.6%9.5%
Source: S&P Ratings
December 31, 2018 vs. September 30, 2018
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
AAA AA A <A NR
12/31/2018 9/30/2018
Quality Distribution
Orange County Sanitation District Long Term
As of December 31, 2018
20
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
0 - 0.25 0.25 - 0.50 0.50 - 1 1 - 2 2 - 3 3 - 4 4 - 5 5+
Orange County Sanitation District Long Term ICE BAML 1-5 Yr US Corp/Govt Rated AAA-A Index
Portfolio Compared to the Benchmark as of December 31, 2018
0 -0.25 0.25 -0.50 0.50 -1 1 -2 2 -3 3 -4 4 -5 5+
Portfolio 13.9% 2.3% 9.4% 15.7% 24.8% 19.8% 11.9% 2.2%
Benchmark*0.2% 0.0% 1.5% 33.5% 29.9% 22.3% 12.6% 0.0%
*ICE BAML 1-5 Yr US Corp/Govt Rated AAA-A Index
Duration Distribution
Orange County Sanitation District Long Term
As of December 31, 2018
The duration of the portfolio contracted during the quarter, predominately due to the aforementioned investment late
in the year, which the Chandler team chose to tactically invest in shorter maturity notes. The overall duration of the
portfolio will be moving closer to the benchmark in Q1, although the bias is still to remain modestly below the index
duration.
21
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
12 months 2 years 3 years 5 years 10 years Since Inception
Orange County Sanitation District Long Term ICE BAML 1-5 Yr US Corp/Govt Rated AAA-A Index
Total Rate of Return Annualized Since Inception 11/30/2014
Annualized
TOTAL RATE OF RETURN 3 months 12 months 2 years 3 years 5 years 10 years Since Inception
Orange County Sanitation District Long Term 1.32%1.51%1.34%1.38%N/A N/A 1.17%
ICE BAML 1-5 Yr US Corp/Govt Rated AAA-A Index 1.57%1.49%1.25%1.27%N/A N/A 1.11%
Total rate ofreturn:A measure of a portfolio’s performance over time.It isthe internalrate of return,which equates the beginningvalue of the portfoliowith the ending value;it includes interest earnings,realizedand
unrealized gains and lossesin the portfolio.
Investment Performance
Orange County Sanitation District Long Term
As of December 31, 2018
22
Category Standard Comment
Treasury Issues 1 year max maturity; Minimum allocation of 10%Complies
U.S. Agencies 20% max issuer; 1 year max maturity Complies
Supranational "AA" rated or better by a NRSRO; 30% maximum; 1 year max maturity; USD denominated senior unsecured
unsubordinated obligations issued or unconditionally guaranteed by IBRD, IFC, or IADB Complies
Corporate (MTNs)"A" rated or better long term debt by a NRSRO; 30% maximum; 5% max issuer; 1 year max maturity; Issued by
corporations organized and operating within the U.S. or issued by depository institutions licensed by the U.S.Complies
Asset Backed/ CMOs "AA" rated or better by a NRSRO; "A" or higher issuer rating by a NRSRO; 20% maximum; 5% max issuer; 1 year max
maturity Complies
Negotiable CDs "A" rated or better long term debt by a NRSRO; or "A-1"/ highest short term rating by a NRSRO; 30% maximum; 5% max
issuer; 1 year max maturity Complies
Certificates of Deposit 5% max issuer; 1 year max maturity; Secured/collateralized Complies
Banker’s Acceptances A-1 rated or equivalent short term rating by a NRSRO; 40% maximum; 5% max issuer; 180 days max maturity Complies
Commercial Paper
A-1 rated or equivalent short term rating by a NRSRO; "A" or better long term debt issuer by a NRSRO; Issued by a
domestic corporation organized and operating in the US with AUM > $500million; 25% maximum; 5% max issuer;
270 days max maturity
Complies
Mutual Fund & Money Market Mutual
Fund
Highest rating or "AAA" rated by two NRSROs; SEC registered adviser with AUM >$500 million and experience greater
than 5 years; 10% per one Mutual Fund; 20% max per issuer on Money Market Mutual Funds; 20% max of the
District's surplus money
Complies
Repurchase Agreements 102% collateralization Complies
Reverse Repurchase Agreements 5% maximum, 90 days max maturity Complies
LAIF Not used by investment adviser Complies
OCIP Not used by investment adviser Complies
Prohibited Municipal Securities Complies
Prohibited Mortgage Securities Complies
Avg Duration Not to exceed 180 days; Max duration of 1/2 year Complies
Max Per Issuer 5% of portfolio (except Supranationals, U.S. Government, Agencies, Mutual Fund)Complies
Maximum Maturity 1 year maximum maturity Complies
Orange County Sanitation District Liquid
Assets managed by Chandler Asset Management are in full compliance with state law and with the investment policy
Compliance As of December 31, 2018
23
Portfolio Characteristics
Orange County Sanitation District Liquid
12/31/2018 9/30/2018
Benchmark*Portfolio Portfolio
Average Maturity (yrs)0.17 0.19 0.22
Average Modified Duration 0.16 0.19 0.22
Average Purchase Yield n/a 2.43%2.23%
Average Market Yield 2.37%2.42%2.25%
Average Quality**AAA AAA/Aaa AA+/Aa1
Total Market Value 176,671,592 75,177,285
*ICE BAML 3-Month US Treasury Bill Index **Benchmark is a blended rating of S&P, Moody’s, and Fitch. Portfolio is S&P and Moody’s respectively.
Many securities were purchased across the Treasury, Agency, Certificate of Deposit, Commercial Paper and Corporate
sectors of the market to keep the portfolio fully invested. The heavy transactional activity was driven by both the large
number of maturing notes, totaling $43.3 million, as well as the large contribution late in the quarter totaling $101.0
million.
As of December 31, 2018
24
Orange County Sanitation District Liquid
Sector Distribution
Agency
5.9%Commercial Paper
2.8%Money Market Fund FI2.3%
Negotiable CD
3.1%
Supranational
2.8%
US Corporate
5.2%
US Treasury
77.9%
December 31, 2018 September 30, 2018
Agency
8.0%Commercial Paper
4.1%
Money Market
Fund FI
1.8%
Negotiable CD
12.1%
Supranational
2.7%
US Corporate
8.3%
US Treasury
63.1%
As of December 31, 2018
The sector allocation evolved with the large contribution into the portfolio late in the quarter. Notably the Treasury
allocation remains higher than the historical experience due to the increased issuance of the Treasury sector, improving
valuations, offset by the light funding needs of both Fannie Mae and Freddie Mac, which is leading to unattractive
valuations in the Agency sector.
25
Issue Name Investment Type % Portfolio
Government of United States US Treasury 77.89%Federal Home Loan Bank Agency 5.41%
Intl Bank Recon and Development Supranational 2.83%
First American Govt Obligation Fund Class-Z Money Market Fund FI 2.30%
PNC Financial Services Group US Corporate 1.66%Toronto Dominion Holdings Negotiable CD 1.15%Bank of Montreal Chicago Negotiable CD 1.13%
Rabobank Nederland NV NY Commercial Paper 1.11%
Bank of America Corp US Corporate 0.85%
Westpac Banking Corp NY Negotiable CD 0.85%Wells Fargo Corp US Corporate 0.85%Toyota Motor Corp Commercial Paper 0.85%
MUFG Bank Ltd/NY Commercial Paper 0.85%
Walt Disney Company US Corporate 0.64%
Paccar Financial US Corporate 0.61%JP Morgan Chase & Co US Corporate 0.57%Federal Home Loan Mortgage Corp Agency 0.46%
TOTAL 100.00%
Issuers
Orange County Sanitation District Liquid –Account #10282
As of December 31, 2018
26
AAA AA A <A NR
12/31/18 38.6%55.6%5.2%0.0%0.6%
09/30/18 45.7%44.6%8.3%0.0%1.3%
Source: S&P Ratings
December 31, 2018 vs. September 30, 2018
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
AAA AA A <A NR
12/31/2018 9/30/2018
Quality Distribution
Orange County Sanitation District Liquid
As of December 31, 2018
27
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0 - 0.25 0.25 - 0.50 0.50 - 1 1 - 1.5 1.5 - 2 2 - 2.5 2.5 - 3 3+
Orange County Sanitation District Liquid ICE BAML 3-Month US Treasury Bill Index
Portfolio Compared to the Benchmark as of December 31, 2018
0 -0.25 0.25 -0.50 0.50 -1 1 -1.5 1.5 -2 2 -2.5 2.5 -3 3+
Portfolio 81.9% 2.6% 15.6% 0.0% 0.0% 0.0% 0.0% 0.0%
Benchmark*100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
*ICE BAML 3-Month US Treasury Bill Index
Duration Distribution
Orange County Sanitation District Liquid
As of December 31, 2018
The duration of the portfolio was little changed, currently 0.19 versus 0.22 at the end of the prior reporting period.
28
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00%
12 months 2 years 3 years 5 years 10 years Since Inception
Orange County Sanitation District Liquid ICE BAML 3-Month US Treasury Bill Index
Total Rate of Return Annualized Since Inception 11/30/2014
Annualized
TOTAL RATE OF RETURN 3 months 12 months 2 years 3 years 5 years 10 years Since Inception
Orange County Sanitation District Liquid 0.57%1.90%1.40%1.09%N/A N/A 0.86%
ICE BAML 3-Month US Treasury Bill Index 0.56%1.87%1.36%1.02%N/A N/A 0.76%
Total rate ofreturn:A measure of a portfolio’s performance over time.It isthe internalrate of return,which equates the beginningvalue of the portfoliowith the ending value;it includes interest earnings,realizedand
unrealized gains and lossesin the portfolio.
Investment Performance
Orange County Sanitation District Liquid
As of December 31, 2018
29
Important Disclosures
2018Chandler Asset Management,Inc,An Independent Registered Investment Adviser.
Information contained herein is confidential.Prices are provided by IDC,an independent pricing source.In the event IDC does not provide a price or if the price provided is not reflective of fair marketvalue,Chandler will obtain pricing from an alternative approved third party pricing source in accordance with our written valuation policy and procedures.Our valuation procedures are also disclosed inItem5ofourFormADVPart2A.
Performance results are presented gross-of-advisory fees and represent the client’s Total Return.The deduction of advisory fees lowers performance results.These results include the reinvestment of
dividends and other earnings.Past performance may not be indicative of future results.Therefore,clients should not assume that future performance of any specific investment or investment strategy
will be profitable or equal to past performance levels.All investment strategies have the potential for profit or loss.Economic factors,market conditions or changes in investment strategies,contributions orwithdrawals may materially alter the performance and results of your portfolio.
Index returns assume reinvestment of all distributions.Historical performance results for investment indexes generally do not reflect the deduction of transaction and/or custodial charges or thedeductionofaninvestmentmanagementfee,the incurrence of which would have the effect of decreasing historical performance results.It is not possible to invest directly in an index.
Source ice Data Indices,LLC ("ICE"),used with permission.ICE permits use of the ICE indices and related data on an "as is"basis;ICE,its affiliates and their respective third party suppliers disclaim any and
all warranties and representations,express and/or implied,including any warranties of merchantability or fitness for a particular purpose or use,including the indices,index data and any data included
in,related to,or derived therefrom.Neither ICE data,its affiliates or their respective third party providers guarantee the quality,adequacy,accuracy,timeliness or completeness of the indices or theindexdataoranycomponentthereof,and the indices and index data and all components thereof are provided on an "as is"basis and licensee's use it at licensee's own risk.ICE data,its affiliates and theirrespectivethirdpartydonotsponsor,endorse,or recommend chandler asset management,or any of its products orservices.
This report is provided for informational purposes only and should not be construed as a specific investment or legal advice.The information contained herein was obtained from sources believed to be
reliable as of the date of publication,but may become outdated or superseded at any time without notice.Any opinions or views expressed are based on current market conditions and are subject to
change.This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as indicator of future results.Past performance is not indicative of
future results.This report is not intended to constitute an offer,solicitation,recommendation or advice regarding any securities or investment strategy and should not be regarded by recipients as asubstitutefortheexerciseoftheirownjudgment.
Fixed income investments are subject to interest,credit and market risk.Interest rate risk:the value of fixed income investments will decline as interest rates rise.Credit risk:the possibility that the
borrower may not be able to repay interest and principal.Low rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk.Market risk:the bond market in
general could decline due to economic conditions,especially during periods of rising interest rates.
Ratings information have been provided by Moody’s,S&P and Fitch through data feeds we believe to be reliable as of the date of this statement,however we cannot guarantee its accuracy.
Security level ratings for U.S.Agency issued mortgage-backed securities (“MBS”)reflect the issuer rating because the securities themselves are not rated.The issuing U.S.Agency guarantees the full andtimelypaymentofbothprincipalandinterestandcarriesaAA+/Aaa/AAA by S&P,Moody’s and Fitch respectively.
As of December 31, 2018
30
Benchmark Disclosures
ICE BAML 3-Month US Treasury Bill Index
The ICE BAML US 3-Month Treasury Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month.At the end of the month that issue is sold and rolled into anewlyselectedissue.The issue selected at each month-end rebalancing is the outstanding Treasury Bill that matures closest to,but not beyond,three months from the rebalancing date.(Index:G0O1.Pleasevisit www.mlindex.ml.com for more information)
ICE BAML 1-5 Yr US Corp/Govt Rated AAA-A Index
The ICE BAML US Issuers 1-5 Year AAA-A US Corporate &Government Index tracks the performance of US dollar denominated investment grade debt publicly issued in the US domestic market,including
US Treasury,US agency,foreign government,supranational and corporate securities.Qualifying securities must issued from US issuers and be rated AAA through A3 (based on an average of Moody’s,S&PandFitch).In addition,qualifying securities must have at least one year remaining term to final maturity and less than five years remaining term to final maturity,at least 18 months to final maturity atpointofissuance,a fixed coupon schedule and a minimum amount outstanding of $1 billion for US Treasuries and $250 million for all other securities.(Index:BV10.Please visit www.mlindex.ml.com for
more information)
ICE BAML US 1-5 Yr US Corp/Govt Rated AAA-BBB Indx
The ICE BAML 1-5 Year US Corporate &Government Index tracks the performance of US dollar denominated investment grade debt publicly issued in the US domestic market,including US Treasury,USagency,foreign government,supranational and corporate securities.Qualifying securities must have an investment grade rating (based on an average of Moody’s,S&P and Fitch).In addition,qualifyingsecuritiesmusthaveatleastoneyearremainingtermtofinalmaturityandlessthanfiveyearsremainingtermtofinalmaturity,at least 18 months to final maturity at point of issuance,a fixed coupon
schedule and a minimum amount outstanding of $1 billion for US Treasuriesand$250million for all other securities.(Index:BVA0.Please visit www.mlindex.ml.com for more information)
As of December 31, 2018