The City of Moose Jaw’s investment portfolios produced surprisingly good returns in 2020, which has helped city council relieve some financial pressure on taxpayers, a city councillor says.
The municipality’s investment committee presented a report during the Feb. 1 regular council meeting that looked at how investments performed during the fourth quarter of 2020 and the year overall.
Council later voted unanimously to receive and file the report.
Long-term portfolio
The long-term portfolio began the fourth quarter with a market value of $71.4 million, and by the end of December, had earned $5.5 million, to bring the total value to $77.02 million, the report showed. This represented an increase of 7.74 per cent.
From January to December 2020, the portfolio grew 9.92 per cent, or $7.042 million; since its inception in 2019, it has grown 9.42 per cent and provided $9.1 million in investment returns.
Moderate-term portfolio
The moderate-term portfolio began the fourth quarter with a market value of $30.2 million. By the end of December, it had earned $1.4 million, to bring the total value to $31.6 million, the report said. This represented an increase of 4.63 per cent.
From January to December 2020, the portfolio grew 6.46 per cent, or $1.925 million; since its inception in 2019, it has grown 6.10 per cent and provided $2.6 million in investment returns.
Numbers a nice surprise
The annual rate objective in the moderate-term pool is 4.25 per cent, while the annual rate objective in the long-term pool is six per cent, so it was impressive that both portfolios performed well above those goals, said Coun. Dawn Luhning. The total investment income earned last year was $8.967 million, equivalent to 30.38 percentage points of municipal taxation.
“The fourth quarter was certainly a nice surprise, after … we had bottoms falling out (in the industry) in March, April and May,” she said. “It turned out to be one of the best years the market has had.”
These investment funds are an important pillar of city council’s ability to fund various programs and services, while they also relieve the burden on taxpayers, Luhning continued. The investment committee — of which she is a member — has made prudent decisions and used a conservative approach during the transition to the new strategic asset allocations, which has produced benefits.
The City of Moose Jaw held bonds in its investment portfolios in May 2019 before the committee reinvested that money into guaranteed investment certificates (GICs). The committee then sold some of those GICs at a premium in 2020, which resulted in investment gains. The group later invested in global bonds and equities, which produced “significantly higher” returns on the GICs.
Global investment outlook
RBC Dominion Securities manages the City of Moose Jaw’s investment portfolios. As part of its report on how well the investments have done, RBC also summarized the global investment outlook.
The economic recovery during the pandemic has exceeded expectations, vaccine developments are promising, and markets have responded positively to the outcome of the United States presidential election, the report said. While economic hurdles are seen in the near-term, RBC’s growth forecasts for 2021 feature more upgrades than downgrades and are situated above the consensus.
“While we expect inflation to remain low, there is the potential for prices to rise faster than our forecasts, and an environment of too much inflation would be worse than not enough,” the report said, adding other uncertainties include the amount and timing of U.S. fiscal stimulus, a weak U.S. dollar, Brexit, and structural themes related to ageing populations, high debt loads and globalization.
The next regular council meeting is Tuesday, Feb. 16.
