Investment Committee

Summary

This document is an Investment Review for the City of Ocala Treasury Investment Fund for the period ending December 31, 2025, prepared by Seix Investment Advisors. It provides a market review and economic outlook, a portfolio review, and discusses portfolio strategy.

Key Market Observations for 4Q 2025:

• The yield curve steepened, with the 2-year to 10-year reference points increasing by 15 bps in the quarter and 37 bps for the full year, ending at +69 bps.
• Moderate positive total returns were seen across the investment grade bond universe, with the Bloomberg U.S. Aggregate Bond Index posting a 7.30% return for the full year 2025, the best since 2020.
• Government shutdowns impacted data releases, leading to headline-driven market shifts and reduced volatility in the rates market.
• The Federal Reserve delivered its second rate cut of the year in October, but market sentiment remained unsettled due to a hawkish tone from Chair Powell regarding future cuts.
• Investment grade corporate credit saw slight outperformance from single A credits and intermediate credit in 4Q. Finance sector outperformed for the full year.

Economic Outlook for 2026:

• Expectations are for continued yield curve steepening.
• Volatility is expected to remain elevated due to geopolitical events, Fed policy uncertainty, and populist policies.
• The market is pricing in more rate cuts for 2026 than the FOMC's median projection.
• Concerns remain regarding fiscal dominance and the pressure on the Fed to keep rates low due to the large stock of U.S. government debt.

Portfolio Review (as of 12/31/2025):

• The City of Ocala Treasury Investment Fund had a market value of $55,152,084.
• Performance for the year 2025 was 7.22% (gross), slightly underperforming its benchmark index (7.30%).
• The portfolio's effective duration was 4.15 years, with an average credit quality of Aa2.
• The portfolio is primarily invested in U.S. Treasury (37.58%), Securitized - RMBS (35.77%), and Government Related (0.00%) sectors, with a significant allocation to Aa rated securities (80.36%).

Citizen Impact

This report details the performance and strategy of the City of Ocala's Treasury Investment Fund. Residents are indirectly impacted as the fund's performance affects the city's overall financial health and its ability to fund public services and projects.

Confidence

high

Summary

This document is the Investment Performance Review for the City of Ocala, prepared by PFM Asset Management for the quarter ended December 31, 2025. It provides a comprehensive overview of the city's investment portfolio performance, market conditions, and future outlook.

Portfolio Performance Highlights:

• The city's investment portfolio had a Total Market Value of $54,937,563.16 as of December 31, 2025.
• The portfolio's Total Return for Q4 2025 was 1.15%, outperforming its benchmark (ICE BofA 1-3 Year U.S Government Index) by 0.03%. Over the past year, the portfolio generated a 5.48% return, also outperforming its primary benchmark (5.09%).
• The Yield At Market was 3.74%, with an Effective Duration of 1.74 years and an overall AA credit quality (S&P).
• Total Dollar Return for the quarter was $627,777, including $569,678 in interest earned.

Market Context & Outlook:

• The U.S. economy remains resilient, but data collection gaps due to a government shutdown biased Q4 inflation lower. The Federal Reserve lowered its target rate by 50 basis points in Q4 2025 to 3.50-3.75%, with projections for 25 bps cuts in both 2026 and 2027.
• The labor market continues to cool, with net new job creation near zero and credit card delinquencies rising, indicating a "K-shaped economy" where higher earners see stronger wage growth.
• PFM Asset Management maintains a neutral to slightly positive outlook for most fixed-income sectors in Q1 2026, with a positive outlook for overall economic growth and easing monetary policy.

Sector Allocation & Activity:

• The portfolio is primarily allocated to U.S. Treasury (41.9%), Corporate bonds (32.7%), and Asset-Backed Securities (20.5%).
• During Q4 2025, the portfolio saw net activity of +$760,929, with significant net purchases in Corporate bonds (+$1,381,970).

Citizen Impact

This report shows how the City of Ocala's investments are performing, directly influencing the city's financial stability and its ability to fund public services without relying solely on taxes. The portfolio's outperformance against its benchmark means city funds are being managed effectively, potentially contributing to a stronger financial position for future city projects and operations.

Confidence

high

Summary

This document is an investment review presentation for the City of Ocala Treasury Reserve Fund, dated February 3rd, 2026, prepared by David Siegel of Sawgrass Asset Management. It covers the bond market review for the 4th quarter of 2025, noting market movements driven by inflation concerns and labor market weakening. Key points include:

• Interest Rate Environment: The Federal Reserve cut rates by 25bps in December 2025 (third cut of the year), with the market pricing in two more cuts for 2026. Policy uncertainty and a new Fed president appointment are noted.
• Market Performance: Treasury yields are at attractive points, with a case for focusing on high-quality assets and investment-grade fixed income. The Treasury curve steepened, and corporate bond spreads widened slightly.
• Portfolio Review: The Ocala Treasury Reserve Fund portfolio saw outperformance due to duration/term structure and sector allocation (overweight mortgage spreads, underweight credit spreads). Security selection hurt due to overweighting high quality.
• Outlook: Extreme uncertainty for 2026, with risks including administration policy, tariffs, geopolitical events, deficits, inflation stickiness, and recession. The strategy is to remain slightly long duration, tactically underweight corporate bonds, and overweight MBS.
• Holdings: The portfolio includes various corporate bonds from companies like Amazon, IBM, Meta, Johnson & Johnson, and others, with a total market value of approximately $7.6 million as of 12/31/2025. The portfolio's effective maturity is 2.52 years, and its quality rating is Aa2.

Citizen Impact

This report details the investment strategy and performance of the City of Ocala's Treasury Reserve Fund. While it does not directly involve new taxes or fees, the effective management of these reserves impacts the city's overall financial health and its ability to fund future projects or services.

Confidence

high

Summary

This document is a quarterly investment review for the City of Ocala's Treasury Investment Portfolio, prepared by CAPTRUST for the period ending December 31, 2025. It details asset class returns, index performance, market values, cash flow summaries, target and actual allocations, investment fees, and detailed investment returns for various managers and the total portfolio over different timeframes (last 3 months, 1 year, 3 years, 5 years, 10 years, and since inception). The report includes statistical summaries comparing portfolio performance against benchmarks and a glossary of investment terms.

Citizen Impact

This report provides transparency on how the city's treasury investments are performing. Understanding these investment returns can indirectly inform residents about the financial health and management of public funds.

Confidence

high

Summary

This report details the city's investment portfolio as of December 31, 2025, totaling $378,015,608. The portfolio is diversified across several investment types, including:

• Internal Investments: Primarily held with Truist Bank and various Florida-specific investment trusts (e.g., Florida Prime/SBA, FL-FIT, FL SAFE, FL Class Term/Treasury), totaling approximately $195 million.
• Fixed Income Managers: Managed by PFM Asset Management, Sawgrass Asset Management, and Seix Investment Advisors, representing approximately $185 million of the portfolio.

The report lists the market value, percentage of the portfolio, and current return rate for each investment. The overall portfolio return rate is not explicitly stated, but individual investment rates range from 1.13% to 3.99%.

Citizen Impact

This report provides transparency on how the city manages its funds. While there is no direct impact on residents' taxes or services, it demonstrates prudent financial management of public assets.

Confidence

high