City investments grew nearly $4M during this year’s Q1, report shows

The City of Moose Jaw’s investment portfolios gained nearly $4 million during this year’s first quarter, while they have generated over $18 million since they were invested nearly four years ago.

During city council’s May 23 regular meeting, the investment committee presented a report dealing with the first-quarter results. Council then voted unanimously to receive and file the document.

The report showed there was $74,527,829.86 in the long-term portfolio and $25,507,685.20 in the moderate-term portfolio as of March 31, for a total of $100,035,515.06.

Long-term portfolio

From Jan. 1 to March 31, the long-term portfolio grew by 3.24 per cent and generated $2,323,842.01. This amount — along with $905,184 in invested capital money — increased the portfolio to $74,527,829.86 from $71,298,803.85.

Moderate-term portfolio

From Jan. 1 to March 31, the moderate-term portfolio grew by 2.25 per cent and generated $554,194.56. This increased the portfolio to $25,207,685.20 from $24,653,490.64.

Combined, both portfolios gained $3,783,220.57 during the first quarter, equal to roughly 11.4 percentage points of municipal taxation, considering one percentage point this year is $330,701.

Since the inception of the portfolios in 2019, they have provided total returns of $18,026,927.

Portfolio changes

Jason G. Antonio -

During the investment committee’s meeting, it made three changes to how it invests money in both portfolios.

Mayor Clive Tolley moved that the City of Moose Jaw reinvest maturing GIC funds (after withdrawals) in the moderate-term portfolio into two-year GIC bond investments within the fixed income policy and return to a neutral-asset mix by the end of Q2; the motion passed.

Tolley also moved that remaining maturing GIC funds in the long-term portfolio be reallocated to actively managed fixed-income investments due to limited potential withdrawals not required until 2025 while maintaining a neutral-asset mix; the motion passed.

Coun. Dawn Luhning moved that the forecasted 2024 withdrawal of $3 million from the long-term portfolio be paid out to the City of Moose Jaw’s operating account; the motion passed.

Comments on portfolios

The first quarter saw positive economic returns, and despite 2022 being a difficult year in the financial world, the portfolio’s returns have been close to the city’s targets since inception, Luhning said during the council meeting.

She explained that the municipality’s investment policy is based on a long-term timeline, which allows the city to weather short-term downturns in the market, as happened last year.

Moreover, the investment committee has structured the investments so there are liquid assets — such as GICs — that mature in the coming years, ensuring the committee does not need to sell equity or bond investments in those down years to fund planned cash-flow needs.

Portfolio manager RBC Dominion Securities will re-balance both portfolios when the market is stronger to a neutral-asset mix by adding bonds and GIC investments when appropriate, Luhning added.

Future outlook

In its Global Investment Outlook, RBC said it still expects a recession in the next year despite the economy starting strong. That strength has come from a positive labour market, buoyant consumer spending and a slight easing of financial conditions, and China’s reopening and Europe’s resilience despite facing energy-price shocks.

The massive and sudden surge in interest rates during the past year continues to cause economic pain, as RBC is seeing weakness in the housing market, riding goods inventories, diminished business confidence and scaledback capital spending. Moreover, several U.S. regional banks have collapsed.

“We assign a 70-per-cent chance to a recession materializing and expect that it will occur in the second half of this year … ,” RBC said. “The anticipated recession’s depth, duration and the speed of the subsequent recovery are similar to our prior assumptions and remain a bit more pessimistic than the consensus.”

RBC is also seeing inflation on a downward trajectory, a multi-year period of the U.S. dollar experiencing significant weakness that will benefit other major world economies, fewer — or none — interest-rate hikes, bond yields returning to long-term norms, and other countries besides the U.S. providing market leadership.