The City of Moose Jaw’s investment portfolios generated nearly $4 million during the second quarter of this year, while they have returned $7.23 million since January.
During city council’s Aug. 9 regular meeting, council received the investment committee’s report with results from the second quarter of 2021. Council then voted unanimously to receive and file the document.
There was $80,466,202.21 in the long-term portfolio and $29,388,387.89 in the moderate-term portfolio as of June 30, for a total of $109,854,590.10. In comparison, as of March 31, those values were $79,545,865.83, $32,376,600, and $111,922,465.83, respectively.
Long-term portfolio
From April 1 to June 30, the long-term portfolio increased by 4.11 per cent and generated $920,385.36. This increased the portfolio to $80.4 million from $79.5 million.
Year-to-date, this portfolio has increased by 7.51 per cent.
Moderate-term portfolio
From April 1 to June 30, the moderate-term portfolio increased by 2.55 per cent and generated $2,988,212.11. However, there were withdrawals that quarter of $3.7 million, which decreased the portfolio to $29,388,387.89 from $32,376,600.
Year-to-date, this portfolio has increased by 4.73 per cent.
Combined, both portfolios generated $3,908,597.47 during the second quarter. Year-to-date, they have generated $7.23 million, equal to 24.4 percentage points in municipal taxation.
Since the inception of these portfolios, they have provided total returns of $18,931,933.45.
Portfolio changes
During the committee’s meeting, it made several changes to how the money is weighted and allocated. This included approving two motions: to maintain five-per-cent overweight in equities for the moderate-term portfolio and to reduce fixed income to reach five-per-cent overweight in equities in the long-term portfolio.
The committee also approved a motion to replace equity fund RBC QUBE with BlackRock, equally split between equity fund XUS (iShares S&P 500 Index) and Europe and the Far East equity fund XEF (MSCI EAFE IMI Index).
Due to low value, RBC QUBE has lagged in performance versus the benchmark and other global fund mandates, the report said. The RBC QUBE low value global equity had invested in global stocks, including the US S&P 500 and markets in Europe, Australia and the Far East (EAFE).
These changes were made because bonds and fixed income go negative during times of inflation — such as now, Coun. Dawn Luhning told council. Since yields go negative when inflation increases, the committee adjusted the investments into equities.
“Overall, the portfolios are doing well … ,” she added.
This report shows why the reserves and investment committee are so important, said Coun. Heather Eby. Since Moose Jaw is a corporation and will likely exist forever, these accounts will likely be around just as long. This means these funds can support the community’s children four generations into the future.
“The market is doing what it’s doing … . Hopefully it will carry on forever,” she added.
Future outlook
With nearly half the world’s population vaccinated and containment of the virus improving, economies are slowly reopening and pent-up consumer and business demand is being unleashed, while permanent scarring from the pandemic appears to be limited, RBC’s global investment outlook report said.
RBC is optimistic about the Canadian economy’s trajectory and anticipated rapid growth this year, followed by slower “but still good growth” in 2022, continued the report. Still, this increase in market expectations has tempered RBC’s enthusiasm as heightened expectations are becoming more difficult to surpass.
Several risks pose challenges to RBC’s positive base case scenario, such as the various COVID-19 variants, a “fiscal hangover” in 2022 after major governing spending initiatives, and central banks considering withdrawing monetary stimulus. Inflation has also spiked higher and could erode purchasing power, increasing borrowing costs and encourage central banks to be more hawkish.
“Rising inflation expectations could become a self-fulfilling prophecy, a wage-price spiral could unfold, and/or a commodity supercycle could emerge. Inflation, an afterthought for the past decade, now requires some attention,” the report said.
Other issues at play, the report added, include a years-long bear market in the United States and underperforming bond yields post-pandemic and post-inflation.
The next regular council meeting is Monday, Aug. 23.
