Q4 2016 Quarterly Earnings Call

The Past, Present and Future

of Diversity in Asset Management
Presented by
City Treasurer Kurt Summers

FEBRUARY 28, 2017 | 12:00 PM

 BEFORE WE GET STARTED…

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WELCOME & PURPOSE OF CALL
Transparency
This is the 9th Quarterly Earnings
Call since the Treasurer took office.
It is open to the public, the City
Council and anyone interested in
understanding the state of
Chicago’s finances.
Best Practices
As the primary investment
manager for the City of
Chicago, the Treasurer seeks to
be held as accountable as any
other investment management
firm is to their investors. This
call is shaped after some
reporting done by the nation’s
largest investment managers
and public companies.
Outreach & Advocacy
During the Treasurer’s 77 visits to
Chicago’s 77 neighborhoods,
residents voiced their need to be
regularly engaged in our outreach and
advocacy efforts. This is an
opportunity to learn about our CTO
initatives and legislation.
Action
This Quarterly Earnings Call for
the City of Chicago is only one
step in financial reporting and
performance tracking of the City’s
investment portfolio. The call will
provide an overview of the
national economy as well as
Chicago's current fiscal landscape
and balance sheet and outline the
economic impact of investing in
our communities.
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 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

4
NATIONAL ECONOMY

Unemployment (Adj.) GDP (% Change)

Q2 2016 Q3 2016 Q4 2016 (adv.)

Nov 2016 Dec 2016 Jan 2017

4.6% 4.7% 4.8% 1.4% 3.5% 1.9%

IMF Expected Growth Rates

Previous Updated Previous Updated

2017 Forecast 2017 Forecast 2018 Forecast 2018 Forecast

Global Economy 3.4% 3.4% 3.6% 3.6%

U.S. Economy 2.2% 2.3% 2.5% 2.2%

Advanced Economies 1.8% 1.9% 1.8% 2.0%

Emerging/ Developing
4.6% 4.5% 4.8% 4.8%
Economies

5
Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, International Monetary Fund
 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

6
CHICAGO ECONOMY

Unemployment
Q3 2016 Q4 2016 Q/Q (%)
National 4.9% 4.7% -0.2%
Chicago 5.4% 5.4% +0.0%

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Sources: Bureau of Labor Statistics, World Business Chicago
CHICAGO ECONOMY

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Sources: Illinois Association of Realtors
CHICAGO ECONOMY OVERVIEW Q4

Chicago’s unique characteristics foster the foundation for continued economic growth
across its diversified economic landscape

Among Chicago’s recent successes:

• Growing opportunities
 24.7% YOY increase in Venture Capital Rounds as of January 2017
 0.3% YOY increase in private jobs
 3.4% YOY increase in wages

• Burgeoning innovation
 3.0% YOY increase in number of new patents as of January 2017

• Global Transit Hub

 14.0% YOY increase in air cargo tonnage routed through ORD and MDW as of January

Source: World Business Chicago, PayScale

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 CHICAGO VC INVESTMENT STATUS

Around $140 million was invested into Chicago area companies in Q4 2016, a significant decline compared
to Q4 last year. However, YOY investments were comparable

10

Source: World Business Chicago

 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

11
 CTO INVESTMENTS – Q4 2016 PORTFOLIO OVERVIEW (CONTINUED)
Q4 2014 Q4 2015 Q4 2016
Security Type Amount % Amount % Amount %
Corporate Bonds $445,867,721.26 7.1% $948,343,350.93 15.9% $1,509,346,000.00 22.2%
Municipal Bonds $447,465,522.07 7.2% $467,450,534.08 7.8% $1,181,329,000.00 17.4%
Agency Bonds $4,162,989,401.15 66.6% $2,024,921,442.35 34.0% $1,706,630,000.00 25.1%
Commercial Paper $563,089,738.76 9.0% $319,724,622.60 5.4% $633,810,000.00 9.3%
Treasury Notes - 0.0% $19,837,800.00 0.3% $20,000,000.00 0.3%
Certificate of Deposit $8,092,219.64 0.1% - 0.0% - 0.0%
Money Market Funds $314,791,300.90 5.0% $1,525,285,001.89 25.6% $1,499,261,959.61 22.2%
Cash $306,595,108.65 4.9% $652,729,413.04 11.0% $252,725,807.74 3.7%
Grand Total $6,248,891,012.43 100.0% $5,958,292,164.89 100.0% $6,803,102,767.35 100.0

Portfolio FY 2014 Earnings FY 2015 Earnings FY 2016 Earnings

Operations Portfolio $14,444,234.89 $22,057,253.55 $61,100,468.41

Bond Proceed Portfolio $22,175,282.30 $21,149,236.00 $19,776,452.00

Reserves Portfolio $13,104,383.16 $14,660,547.40 $44,582,448.48

Total Portfolio $49,723,900.35 $57,867,036.95 $125,458,452.00

Chart Source: Chicago City Treasurer’s Office 12

 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

13
THE PAST: THE STATE OF THE INDUSTRY

Graph Source: Russell Reynolds Associates (2014) 14

THE PAST: THE STATE OF THE INDUSTRY (CONT.)

15
Chart Source: Russell Reynolds Associates, McKinsey.
 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

16
THE PRESENT: HOW INDUSTRY EXPERTS ARE CHALLENGING THE STATUS QUO

INFORMATION ON LENDING #s IN
Les Bond, CEO, Attucks CHICAGO OR NATIONALLY FOR
Asset Management
WOMEN
With 28 years of investment AND POC experience
management COMPAREDand TO 18 years as a successful
entrepreneur, Mr. Bond WP
is responsible for the overall management of Attucks as
well as new product and business development.

17
 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

18
THE FUTURE: WHAT NOW?

INFORMATION ON LENDING #s IN
CHICAGO OR NATIONALLY FOR
WOMEN AND POC COMPARED TO
Damien Dwin, co-CEO andWP co-Founder of Brightwood Capital Advisors, LLC
Damien Dwin is Co-CEO and Co-Founder of Brightwood. Damien has been involved in all
phases of the firm’s development since its founding in 2010. He is a member of the
executive committee and serves on the investment committee of all Brightwood funds.

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 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

20
OUR FIGHT LOCALLY- THE CHICAGO COMMUNITY CATALYST FUND

Description Impact Focus Funding Governance

Investment groups selected

Low to middle income
Chicago Community Catalyst
communities in Chicago’s 77
Fund
neighborhoods, specifically those
Invests renewable city dollars in
meeting Community Reinvestment
neighborhood projects.
Act criteria.
Long-term self-sustaining fund.
Seeded with $100M for renewable
use in neighborhood investments,
with ability to grow fund overtime
as Treasurer’s Office exceeds
investment targets and private
investors join.
through RFP process overseen by
Board of Directors, chaired by
Treasurer, with CFO, Planning
Commissioner and 4 mayoral
appointments confirmed by
Council. Advisory Board with 3
aldermen and 4 community
members.

Chart Source: Chicago City Treasurer’s Office 21

OUR FIGHT LOCALLY- THE CHICAGO COMMUNITY CATALYST FUND (CONT.)

The Chicago Community Catalyst Fund:

• will be launched with a 3-year, $100 million commitment from the City of Chicago.
 Year 1: $35M
 Year 2: $35M
 Year 3: $30M

• is structured to protect against conflicts of interest. The Fund77 investment board

members will comprised of investment experts.

• The advisory board structure ensures investments are made with local knowledge and
partnership.

• will be subject to stringent oversight by City Council and Chicago’s taxpayers.

• serves a new and distinct function in Chicago’s development ecosystem.

• investments will match the diversity of Chicago.

Chart Source: Chicago City Treasurer’s Office 22

OUR FIGHT LOCALLY- THE CHICAGO COMMUNITY CATALYST FUND (CONT.)

$
+ Outside $$

Chart Source: Chicago City Treasurer’s Office 23

 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

24
 5
2017: INNOVATION & IMPLEMENTATION

DRIVING VALUE THROUGH ACTION TO CHICAGO’S COMMUNITIES

HOME BUYER
ASSISTANCE CCCF/FUND77 BHM SCHOLARSHIP
PROGRAM

IMPACT IMPACT IMPACT

A grant program for Investment vehicle focusing 10th Annual CTO Black History
individuals who are buying a on Chicago’s 77 Month Essay Scholarship to
home or refinancing an neighborhoods (Approved on support a Chicago Public
existing mortgage within the September 9th,2016 ) School Senior
City of Chicago

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Home Buyer Assistance Program
WHO QUALIFIES? Anyone who meets the income and credit score requirements is eligible for
the program. There are two categories of loans available, each with their own
requirements:

FHA, VA, USDA Loans: Regardless of family size, the borrower’s annual
income must be $87,400 or less. As set by FHA, VA, or USDA guidelines,
participants will generally need a minimum credit score of 580 to qualify.

Fannie Mae/Freddie Mac Loans: Regardless of family size, the borrower’s

annual income must be $133,000 or less. As set by Fannie Mae/Freddie Mac
guidelines, participants will generally need a minimum credit score of 640 to
qualify.

DO I NEED TO BE A FIRST-TIME HOME BUYER? No

HOW MUCH GRANT MONEY COULD I RECEIVE? Qualified borrowers may receive a grant for up to 7% of the total loan amount
based on income. For example, for a total loan amount of $250,000, a
borrower could receive a grant of no more than $17,500 to cover down
payment and closing costs.

WILL I BE REQUIRED TO USE MY OWN FUNDS? Qualified borrowers will be required to contribute the lesser of $1,000 or 1%
of home purchase price at the closing.

CAN THIS PROGRAM HELP ME REFINANCE MY HOME? Yes, as long as there is no cash back to the borrower.

To learn more about the Home Buyer Assistance Program and a complete list of approved lenders, please visit
www.cityofchicago.org/homebuyer or www.chicagoinfrastructure.org

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Home Buyer Assistance Program- Approved Lenders

For a complete list of approved lenders, please visit www.cityofchicago.org/homebuyer

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BLACK HISTORY MONTH COLLEGE SCHOLARSHIP WINNER- MALCOLM FOX

Congrats to Malcolm Fox, the winner of $2,500 Black History Month Scholarship!

Fox is a senior at Wendell Phillips Academy High School where he is ranked third in his
class.

This fall, he will be attending Wesleyan University where he will play football for the
Wesleyan Cardinals and major in economics with a minor in data analysis.

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 12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 The Present: How Industry
Experts are Challenging the
Agenda

Agenda 02 12:05 – 12:10

Status Quo

12:30 – 12:35
National Economy 07 The Future: What Now?

12:10 - 12:15 12:35 – 12:45

03 Chicago Economy 08 Our Fight Locally

12:15 – 12:20 12:45 – 12:50

04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00

05 The Past: State of the Industry 10 Q&A

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Q&A

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DEBRIEF AND CLOSING

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VISIT US AT WWW.CHICAGOCITYTREASURER.COM

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Thank You For Joining

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DISCLAIMER

PLEASE NOTE:

This presentation has not been prepared to give information for making
decisions on buying or selling securities and should not be relied upon by
investors in making investment decisions.

With respect to any bonds, notes, or other debt issued by the City of
Chicago, please refer for information only to the City’s disclosure documents
and continuing disclosure filings for such bonds, notes, or other debt
obligations.

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