April 2016                                                                                                                                                          Volume 12 - Number 4

Monthly Market Update

In This Issue
(click on logo to link to website)






President's Perspective
CalTRUST Updates
The Annual Meeting of the CalTRUST Board of Trustees was held today in Riverside County.   Items of business considered at the meeting included updates from each of the business partners, a review of the current information statement and investment policy, the 2016-17 budget, and the current economic environment. 

In order to make CalTRUST an available option for all agencies, large and small, the Board voted to remove the $250,000 minimum investment threshold.  This allows smaller agencies and special districts easier access to participate in CalTRUST.  

Further, the Board adjusted the liquidity in the Medium-Term Fund to weekly.  Whereas previously purchases and redemptions were only allowed on the last business day of the month; purchases and redemptions can now be made on the Wednesday of each week with five days notice. 

As the Medium-Term Fund has grown, the CalTRUST Board of Trustees sees value in having it rated, as is the Short-Term Fund, Money Market Fund, and Government Fund.  A rating on the Medium-Term Fund will further the transparency of our program.  As such, a rating will now be obtained for the Medium-Term Fund. 
With Money Market Reform Implementation Deadline Nearing, CalTRUST Government MMF Offers Stable Value Option
SEC-adopted money market reforms will alter the manner in which prime institutional money market funds (MMFs), such as the CalTRUST Heritage MMF, operate. The new rules, which take full-effect in October of this year: 
  • Require prime institutional funds to transact at a "floating" NAV, rather than the traditional $1.00 share price; and 
  • Authorize prime institutional MMF Boards to impose redemption gates and fees in times of market illiquidity. 
 In response to these changes, the CalTRUST Board worked with our investment advisor, Wells Fargo Asset Management, to provide an investment option with a stable NAV and same-day liquidity. The CalTRUST Government MMF gives local agency investors: 
  • A stable $1.00 NAV, with no redemption gates or fees; 
  • Same-day liquidity for purchases and redemptions until 1 pm PT; "AAAm" and "Aaa-m" ratings from S&P and Moody's, respectively; 
  • Highly competitive money market rates; 
  • Best available expense ration in Select Class shares; and 
  • Full compliance with all provisions of Rule 2a-(7) governing SEC-registered money market funds. 
This last point is worth emphasizing since not all funds being marketed to California local agencies as money market funds - or 'money market-like' funds - are fully compliant with all provisions of Rule 2a-(7).  

more information on the CalTRUST funds, please contact me by email at the address listed below, or contact:   
Lyle Defenbaugh, Wells Fargo Asset Management            916-440-4890  
Laura Labanieh, CSAC Finance Corporation                    916-650-8186 
Norman Coppinger, League of CA Cities                           916-658-8277
Neil McCormick, CA Special Districts Association            916-442-7887

Chuck Lomeli is CalTRUST President
and Solano County Treasurer
Financial Markets Update
We've Seen This Movie Before: 1st Quarter Growth Of 1% Likely to Quicken To Still Modest 2-2.5% Growth Through Spring


In his First Quarter 2016 Economic & Investment Commentary, WellsCap Senior Economist Gary Schlossberg, looks at factors likely to shape the markets over the next year or two, against the backdrop of another disappointing first quarter growth period, characteristic of this post-financial crisis recovery. 

Gary sees ongoing support from the housing market and consumer spending, and an ongoing recovery in manufacturing, as catalysts for growth to return to a hardly robust 2-2.5% through the remainder of 2016. For the first time in this recovery, Gary notes, the seeds of re-inflation are germinating in the services sectors, even though "headline CPI inflation" remains well below the Fed's 2% target. 

With respect to the fixed-income markets, Gary see difficult choices facing bond investors. While the Fed's announced go-slow approach to rate increases, seemingly offers opportunities in higher-yielding, longer-maturity securities, he sees two levels of risk in such an "interest-rate strategy": 
  • First, historically low yields leave little to no cushion against price declines resulting from unexpected rate increases; and 
  • Second, an unforeseen run-up in prices could send longer-term yields higher. Alternatively, he points out, if the Fed stays on hold , foreign investors yield-driven demand for US securities could vanish, leaving yield premiums narrower than anticipated.   
Gary's complete Economic & Investment Commentary can be accessed here. 
CalTRUST Portfolio Snapshot (as of March 31, 2016)
1. CalTRUST Short-Term and Medium-Term and LAIF yields are net of fees.  Merrill 1-5 Year Indexes are unmanaged; and do not reflect any deduction for administrative fees or expenses.
2. CalTRUST and LAIF returns are net of all investment advisor, administrative and program fees.
3. Annualized.
4. The CalTRUST Short-Term and Medium-Term portfolios commenced operations on February 13, 2005.
CalTRUST Heritage Money Market Fund


Treasury Yield Curve 


2016 Calendar

May 27

Memorial Day Observed

Early Closure - 10:00 am PST


May 30

Memorial Day

Closed for Trading


July 1 

Independence Day Observed

Early Closure - 10:00 am PST


July 4

Independence Day Observed

Closed for Trading


September 5

Labor Day

Closed for Trading


October 10

Columbus Day

Closed for Trading


November 11

Veterans Day

Closed for Trading


November 24


Closed for Trading


November 25

Thanksgiving Holiday

Early Closure - 10:00 am PST


December 23 Observed

Christmas Eve

Early Closure - 10:00 am PST


December 26

Christmas Observed

Closed for Trading


December 30

New Year's Eve Observed

Early Closure - 10:00 am PST


January 2, 2016

New Year's Day Observed

Closed for Trading


The CalTRUST Monthly Market Update  is prepared monthly by the Investment Trust of California (CalTRUST) for participants in the CalTRUST Joint Powers Authority pooled investment program.  The Newsletter is prepared solely for informational purposes and is not to be construed as the solicitation of an offer to sell or of an offer to buy any security, nor is it intended to constitute a recommendation for the purchase or sale of any security.  The information contained herein is based upon data obtained from sources believed to be reliable, but is not guaranteed by us as being accurate and does not purport to be a complete summary of the available data.  Additional data will be provided upon request. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.  Information, opinions and estimates contained in the Monthly Market Update reflect a judgment at its preparation date by CalTRUST and are subject to change without notice.  The price, value of, and income from any securities or financial instruments issued by the entities mentioned in this Monthly Market Update may fall as well as rise.