The City of Moose Jaw’s investment portfolios generated nearly $10 million this year in interest, while the portfolios have created over $20 million in additional revenue since their inception two years ago.
During city council’s Dec. 13 regular meeting, council received the investment committee’s report for 2021. From Jan. 1 to Nov. 30, the municipality’s medium-term and long-term portfolios had generated $9,255,474.49 in interest.
There was $29,806,075.08 in the medium-term portfolio and $82,061,692.44 in the long-term portfolio as of Nov. 30, for a total of $111,867,767.52. In comparison, by the end of 2020, those portfolios were $31,279,510.67 and $75,367,454.91, respectively.
Since 2019, the portfolios have generated a combined $20,945,110.87 in interest.
Council later voted to receive and file the document.
Medium-term portfolio
During the shortened fourth quarter, the medium-term portfolio saw a negative return of 0.44 per cent. However, year-to-date, the portfolio achieved 6.35 per cent, while it has seen returns of 6.4 per cent since inception in 2019.
In comparison, the expected return of this file was 4.25 per cent.
Long-term portfolio
During the shortened fourth quarter, the long-term portfolio saw a negative return of 1.12 per cent. However, year-to-date, the portfolio has achieved 9.70 per cent, while it has seen returns of 9.88 per cent since inception two years ago.
In comparison, the expected return of this investment file was six per cent.
Committee comments
The investment committee continues to overweight both portfolios in equities by about five per cent, a decision made to offset historic lows in fixed income markets that are seeing negative returns due to inflation, said Coun. Dawn Luhning, a member of the investment committee.
The committee’s decision to sell the city’s bond portfolio and reinvest that money into guaranteed investment certificates (GICs) is proving to be a good decision, she added, given the near-negative — or in some cases, actual negative — returns of current bond opportunities.
Investment outlook
The economic rebound from last year’s recession is now past and some of the “extreme dislocations” resulting from the pandemic are moderating, the Royal Bank of Canada said in its global investment outlook that was part of the investment report.
“While the economy is slowing, growth remains robust and consumers are well-positioned to support the expansion. Bond yields remain unsustainably low and we continue to prefer equities as surging corporate profits have pushed the bull market to new highs,” the report continued.
RBC forecasted that real gross domestic product (GDP) growth in many developed countries would be about four per cent, nearly double the pre-pandemic levels. While the pandemic remained a risk and government stimulus money was still floating around, one factor that could offset those risks is the trillions of dollars that consumers had saved and that could boost the economy through increased spending.
Inflation was expected to return to pre-pandemic levels once the “distortions of the pandemic” had faded, while the U.S. greenback was expected to see a long-term downward trend with further weaknesses in the coming years, the report added. Meanwhile, soaring corporate profits were contributing to an extended bull market in stocks.
The next regular city council meeting is Monday, Jan. 10.
