Ocean State Investment Pool - Rhode Islanddata.treasury.ri.gov/dataset/5f706bb9-ab48-4c41-b6... · 3.0 3.5 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19)

Not FDIC Insured May Lose Value No Bank Guarantee

For institutional use only. l © 2017 FMR LLC. All rights reserved.

January 2017

Ocean State Investment Pool

Not NCUA or NCUSIF insured. May lose value. No credit union guarantee.

Presented by:

Steve Johnson, Senior Vice President, Fidelity Institutional Asset Management

Kerry Pope, Institutional Portfolio Manager, Fidelity Management Research Company

Agenda

1. Current Market Conditions

2. Ocean State Investment Pool Composition

3. Appendix

A. Organizational Overview

2 For institutional use only.

Current Market Conditions

For institutional use only.

LIBOR Impacted by Regulatory Reform and Federal

Reserve Policy

Source: Bloomberg as of 12/30/2016

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16

Yie

ld (

%)

1-Month LIBOR 3-Month LIBOR


Commercial Paper Market Adjusts to Regulatory Reform

5

0

1

2

3

4

5

6

0

500

1,000

1,500

2,000

2,500

Co

mm

erc

ial

Pap

er

Yie

ld

Co

mm

erc

ial

Pap

er

Ou

tsta

nd

ing

(in

$B

illio

ns)

Nonfinancial Commercial Paper Outstanding; seasonally adjusted

Financial Commercial Paper Outstanding; seasonally adjusted

Asset-backed Commercial Paper Outstanding; seasonally adjusted

Other Commercial Paper Outstanding; seasonally adjusted

Commercial Paper Placed 180 Day Yield

Source: Federal Reserve & Bloomberg Finance L.P., as of 12/31/2016


Fed Rate Hike Probabilities

6

Source: Bloomberg as of 12/31/2016


28.6%

46.4%

36.3%

22.2%

2.7%

20.7%

32.5%

32.9%

3.5%

13.4%

25.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Mar-17 Jun-17 Sep-17 Dec-17

Date of FOMC Meeting

1 Rate Hike 2 Rate Hikes 3 Rate Hikes

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Federal Funds Target Rate

Pre-Election Market Expectations As of Nov 8, 2016

Dec 2016 Federal Reserve Fed Funds Projections

Median Fed Funds Projection

Post-Election Market Expectations As of Jan 4, 2017

Market Pricing of Short Rates in 1 Year (Constant-maturity Eurodollar Future)

Markets are Expecting a Faster Pace of Fed Hikes Post-Election

Source: Sources: Federal Reserve, US Treasury, Bloomberg and FMR Research as of 01/04/2017.

7

Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019

For Institutional Use Only

4.7

4.0

4.5

5.0

5.5

6.0

Unem

plo

ym

ent R

ate

(%

)

Actual Unemployment Rate

Federal Reserve’s Economic Projections

Source: Bloomberg and Federal Reserve

Actual Inflation as of 11/30/2016, Actual Unemployment Rate as of 12/31/2016, and Actual GDP as of 9/30/2016

FOMC Forecast based on the central tendency (excludes the three highest and three lowest projections for each variable in each year) as of 12/14/2016

1.65

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

PC

E Y

oY

(%

)

1.7

1.0

1.5

2.0

2.5

3.0

3.5

Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19

Real G

DP

YoY

( %

)

Actual Inflation

Inflation Forecast

Unemployment Rate Forecast

Actual GDP

GDP Forecast


-2

-1

0

1

2

3

4

5y R

eal Y

ield

(%

)

Gradual Conventional Tightening After Years of

Unconventional Tightening

Source: Federal Reserve, Bloomberg as of 12/31/2016

Conventional

Tightening Conventional

Easing

Unconventional

Easing Unconventional

Tightening

1.00%

5.25%

0.125%

QE3

Sep ‘12

0.625%

QE1

Jan ‘09

QE2

Nov ‘10

“Mid-2013”

Aug ‘11 Taper Talk

May ‘13

“Meeting by

Meeting”

Mar ‘15

Taper

Dec ‘13

“Considerable

Time”

Mar ‘14

Fed Hikes

25 bps

Dec ‘15


0

1

2

3

4

5

6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Fe

d F

unds T

arg

et

Rate

(%

)

Fed Hikes

25 bps

Dec ‘16

0

10

20

30

40

50

60

0

50

100

150

200

250

300

350

400

450

500

Se

p-1

3

Nov-1

3

Jan

-14

Ma

r-14

Ma

y-1

4

Jul-1

4

Se

p-1

4

Nov-1

4

Jan

-15

Ma

r-15

Ma

y-1

5

Jul-1

5

Se

p-1

5

Nov-1

5

Jan

-16

Ma

r-16

Ma

y-1

6

Jul-1

6

Se

p-1

6

Nov-1

6

Total Fed Overnight Repo Total Fed Term Repo Fed Repo Rate

Fed RRP Supplies Growing Government MMF Demand

10

Fe

d R

epo (

$B

illio

ns)

Fe

d R

epo R

ate

(bps)

$1B $3B $5B

$500 MM

Sources: Federal Reserve and Fidelity Investments as of 12/31/2016

$7B

$10B $30B


MAXIMUM ALLOTMENT CAP, FIXED RATE, OUTSTANDING AMOUNTS

Ocean State Investment Pool Composition


You could lose money by investing in the OSIP. An investment in the OSIP is not a deposit of a bank and is not insured or guaranteed by

the Federal Deposit Insurance Corporation or any other government agency. Although OSIP seeks to preserve the value of the

investment at $1.00 per unit, there is no guarantee that it will do so. Neither OSIP's Sponsor, Advisor nor any of their affiliates has a legal

obligation to provide financial support to the Pool at any time.

Source: Fidelity Investments as of 12/31/2016

0.9950

0.9975

1.0000

1.0025

1.0050

Dec-1

5

Jan

-16

Fe

b-1

6

Ma

r-16

Ap

r-16

Ma

y-1

6

Jun

-16

Jul-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

Nov-1

6

Dec-1

6


Primary Investment Goal to Minimize NAV Volatility


MARKET VALUE NAV

GASB Statement 79 Utilization of Repurchase Agreements

Non-Traditional Repurchase Agreements are Limited:

• Both counterparty and collateral must meet credit quality tests

• Look through to collateral for diversification test

• US Gov’t and Non-US Gov’t collateral allowed, but repo collateral must be an asset that the LGIP

permitted to own directly other than maturity

• Consider custodial risk

13


8%

19%

14%

8% 4%

9%

20%

7%

7% 4%

25%

11%

16% 1% 2%

7%

28%

1%

9% North American Banks

Asian/Australian Banks

Eurozone

Nordic/Swiss Banks

UK Banks

Asset Backed CP

Non-Traditional Repo

Other Corp/VRDN

Government/Repo

Finance Companies

Net Other Assets*

Ocean State Investment Pool Composition

Portfolio diversification is presented to illustrate examples of the securities that each fund

has bought and may not be representative of a fund’s current or future investments.

Each fund’s investments may change at any time. Percentages may not add up to

100 due to rounding.

*Net Other Assets may include cash and receivables and payables related to open security or capital stock trades.



DECEMBER 31, 2016 DECEMBER 31, 2015

Portfolio Characteristics

Net Assets $392 Million

Weighted Average Maturity (WAM) 26 Days

Weighted Average Life (WAL) 51 Days

Portfolio Characteristics

Net Assets $316 Million

Weighted Average Maturity (WAM) 33 Days

Weighted Average Life (WAL) 43 Days

Historical Weighted Average Maturity


*SEC limit for Money Market Mutual Funds

0

10

20

30

40

50

60

70

Dec-1

5

Jan

-16

Fe

b-1

6

Ma

r-16

Ap

r-16

Ma

y-1

6

Jun

-16

Jul-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

Nov-1

6

Dec-1

6

Days to M

atu

rity

Ocean State Investment Pool SEC Limit


*

Performance Review

For institutional use only. 16

Ocean State Investment Pool 7-Day Yield

Cumulative Annualized

3-Month 6-Month 1-Year 3-Year LOF*

Net Yield 0.81% 0.18% 0.32% 0.57% 0.28% 0.22%

Citigroup 3-Month Treasury Bill 0.08% 0.15% 0.27% 0.11% 0.09%

Value Added 0.10% 0.17% 0.30% 0.17% 0.13%

*Inception date is March 6, 2012

Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any.

Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value

will fluctuate, so you may have a gain or loss when shares are sold. Index performance is not meant to represent that of OSIP.

Sources: Fidelity Investments as of 12/31/2016.

First Quarter Investment Strategy and Outlook

Investment Strategy

• Seeking to preserve principal, maintain liquidity and achieve superior risk-adjusted performance

– Emphasize fundamental and macro research in formulating portfolio structures

– Manage weighted average maturities (WAM) and weighted average life (WAL) constraints to enhance NAV stability, liquidity

and performance

– Position portfolios based on our assessment of relative value across the money market yield curve within the context of our

approved credits

Outlook

• Less regulation, lower taxes, and more assertive foreign policy are policy shifts that boost growth

– With potential exceptions, Trump policies should be supportive of business profits and growth

– Strengthening economic activity may be associated with higher rates of inflation

– Fiscal stimulus may be limited and unfold over years

– A truly populist agenda may reduce trade and growth

– A higher degree of uncertainty around policy has increased the variability of potential outcomes

• The Fed is still on a path of gradual tightening, given their optimistic outlook

– FOMC is more hawkish than expected given the modified forward guidance

– Despite the hawkish signals, the market is pricing in two hikes in 2017 starting as early as June

– Yellen sounds cautious on fiscal policy awaiting further details before the Fed adjust their plans materially

– Higher US growth and inflation may provide the BOE, ECB and BOJ an opportunity to discontinue monetary accommodation


Appendix – Service and Marketing Overview


Team Dedicated to State of Rhode Island

Steve Johnson, CTP

Senior Vice President, Relationship Management

[email protected]

603-791-6657

Michael Morin, CFA

Director of Institutional Portfolio Manager

[email protected]

603-791-7748

Michael Widrig

Portfolio Manager

[email protected]

603-791-7673

OSIP Client Services

[email protected]

855-900-OSIP

19

Fidelity Institutional Asset Management (FIAMSM )

Founded in 1979, Fidelity Institutional Asset Management (FIAMSM ) markets Fidelity mutual funds

and other products to certain institutional investors and investment professionals at financial

institutions nationwide. FIAMSM clients hold over $570 in Asset Under Administration as of 12/31/16

FIAMSM Institutional Liquidity Solutions (FILMS) Provides registered and non-register short duration liquidity products to the public sector, not-for-

profits, higher education, corporate and banks. FILMS’ clients hold over $131B* in AUM as of

12/31/16 ($128B was invested in Money Market Funds and $3B in longer duration).

* Asset Under Management and Assets Under Administration provided by the Finance Group within FIAMSM

http://www.google.com/url?url=http://blogdailyherald.com/2010/11/03/rhode-island-still-plantation-state/&rct=j&frm=1&q=&esrc=s&sa=U&ei=N1YMVZ3QLoy-ggTKmYLYCQ&ved=0CBgQ9QEwAQ&usg=AFQjCNGfLCVT7xn2FmeyW4ADx_nPksaF2Q


History

OSIP Investment Strategy - Seeks to preserve principal, maintain liquidity, and achieve a market

rate of return

Fidelity selected via competitive RFP process to manage and distribute OSIP in November 2011

OSIP funded by State of RI in March 2012

Fidelity received a three year contract extension on May 1, 2015; expires April 30, 2018

OSIP total assets as of December 31, 2016 were $392.3 million

Eleven State municipalities/agencies utilize OSIP

Fidelity Marketing and Distribution Support

Hosted two educational OSIP kick off events that were attended by Treasurer Raimondo in April

and June of 2012, including all eligible Rhode Island municipalities/agencies

Hosted a third OSIP educational meeting that was attended by Treasurer Magaziner in February

2016. Invitations were sent to all eligible Rhode Island municipalities/agencies

20 For Institutional Use Only


(Fidelity Marketing/Distribution Support – continued)

Fidelity participated, exhibited, and marketed OSIP during the Annual Convention of RI

League of Cities and Towns in 2013, 2014, 2015, 2016 and 2017

Representatives from Fidelity actively participate in the RI Government Finance Officers

Association meetings representing OSIP

The annual New England States Government Finance Officers Association hosted in

providence in 2014 received the highest “platinum” level of sponsorship from Fidelity with

multiple associates in attendance representing OSIP

Over 797 OSIP related interactions since the 2012 launch

Twelve marketing campaigns were implemented since the launch in 2012 reaching all

eligible investors multiple times

21

For Institutional Use Only

Benefits of OSIP

Seeks to Provides a Safe and Liquid Investment with a market rate of return

Provides investment diversification managed by a trusted experienced asset

manager

Provides an alternative product resulting in RI municipalities achieving more

competitive pricing from their banks

For Institutional Use Only 22

Past performance and is no guarantee of future results.

Appendix – Organizational Overview


Asset Management Over 40 years of experience serving fixed income clients worldwide


Assets noted are as of September 30, 2016.

Information presented, including number of investment professionals, represent the combined resources of FIAM and Fidelity Investments

as of September 30, 2016. Fixed Income assets include investment grade and high income products, bond sub-portfolios of multi-asset class

strategies and money market cash management vehicles.

24

History

Fidelity founded in 1946

Fidelity has been managing

Fixed Income since 1971

Global multi-asset class

solutions provider

People

Global Investment

Professionals: 860

Fixed Income

Professionals:

Research:

Trading:

Portfolio Management:

Other:

211

109

32

42

28

Assets

Fidelity Assets Under

Management: $2.1T

Fixed Income Assets:

Bond Assets:

Money Market Assets:

$933.3B

$410.2B

$523.1B

Fixed Income Team Structure


Lisa Goulemas COO

Chris Bartel Global Head of

Fixed Income

Research

Trading 30 Traders

Portfolio Management 30 PMs

Fixed Income Division

Research 90 Analysts

Inst. Portfolio

Management 8 IPMs

$12 billion

Liquidity Management Solutions** 4 Portfolio Managers*

3 Traders

$370 billion $99 billion**

Money Market: Government 3 Portfolio Managers*

3 Government Traders

3 Repo Traders

Money Market: Tax-Exempt 3 Portfolio Managers

4 Traders

$42 billion

Money Market: Prime** 2 Portfolio Managers*

2 Traders

Investment Support 35 Associates

Nancy Prior President,

Fixed Income

Mark Flaherty CIO,

U.K.

Bob Brown Head of Institutional

Fixed Income

Tim Huyck CIO,

Money Markets

Christine

Thompson CIO,

Bonds

Shawn Verbout Head of

Quantitative

Research

25

Sources: Fidelity Investments as of 9/30/2016

* One portfolio manager covers general purpose, government, and LMS portfolios.

** Prime is comprised of registered and non-registered money market funds. Liquidity Management Solutions include other registered and non-

registered short-duration funds.

Portfolio Management Teams

GOVERNMENT PRIME MUNICIPAL LIQUIDITY MANAGEMENT

SOLUTIONS

Duration (DWAM) Less than 60 days Less than 60 days Less than 60 days Less than 365 days

Quality Tier 1 Tier 1/Tier 2 Tier 1/Tier 2 Investment grade

Key Sectors

U.S. Treasury and other U.S.

government securities and

repurchase agreements

U.S. Treasury and other U.S.

government securities and

repurchase agreements, CP,

CDs, corporate notes, and other

private instruments

Tax-exempt securities issued by

agencies of the federal

government, state and local

governments, and non-profit

entities

Taxable and tax-exempt U.S.

dollar-denominated money

market and high quality

investment-grade debt securities

of all types, and repurchase

agreements

LMS

PLATFORM

DEDICATED

RESOURCES

CIO Tim Huyck, 29 years experience

Portfolio

Managers

Rob Chan, CFA, 16 years experience Kevin Gaffney, 24 years Rob Galusza, 31 years Rob Mandeville, CFA, 9 years

Doug McGinley, 26 years Elizah McLaughlin, CFA, 17 years Andy Messier, CFA, 21 years Maura Walsh, CFA, 24 years

Michael Widrig, CFA, 26 years

Institutional

Portfolio

Managers

Michael Morin, CFA, 27 years experience Kerry Pope, CFA, 27 years

Quantitative

Analysts Shawn Verbout, Ph.D, 29 years experience Prashant Kharade, 12 years Akash Vallecha, 17 years

Fidelity Liquidity Management Solutions Team Dedicated and experienced team offering diverse strategies

$523B Total AUM

$370B $99B* $42B $12B

Fidelity Assets Under Management (AUM) noted as of September 30, 2016.

* Prime is comprised of registered and non-registered money market funds. Liquidity Management Solutions include other registered and non-

registered short-duration funds.


Important Information

For institutional use only. 27

Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, or to give advice in

a fiduciary capacity, in connection with any investment or transaction described herein. Fiduciaries are solely responsible for exercising

independent judgment in evaluating any transaction(s) and are assumed to be capable of evaluating investment risks independently, both in general

and with regard to particular transactions and investment strategies. Fidelity has a financial interest in any transaction(s) that fiduciaries, and if

applicable, their clients, may enter into involving Fidelity's products or services.

Not a deposit of a bank. No guarantee by the State of Rhode Island or the U.S. Government or any of its agencies.

Not NCUA or NCUSIF insured.

May lose value. No credit union guarantee.

The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover

and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any

time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as

investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of

trading intent on behalf of any Fidelity fund.

Past performance is no guarantee of future results. Investment return will fluctuate, therefore you may have a gain or loss when you sell shares.

Diversification does not ensure a profit or guarantee against a loss. The Ocean State Investment Pool Trust (OSIP) is offered by The State of Rhode

Island and managed by FIAM LLC (formerly known as Pyramis Global Advisors®), a Fidelity Investments company. FIAM LLC is an investment

adviser registered under the Investment Advisers Act of 1940. Fidelity Investments Institutional Services Company, Inc. (FIISC), an affiliate of FIAM

LLC, is the servicing agent for OSIP. OSIP is not a mutual fund and is exempted from the Investment Company Act of 1940.

You could lose money by investing in the OSIP. An investment in the OSIP is not a deposit of a bank and is not insured or guaranteed by the

Federal Deposit Insurance Corporation or any other government agency. Although OSIP seeks to preserve the value of the investment at $1.00 per

unit, there is no guarantee that it will do so. Neither OSIP's Sponsor, Advisor nor any of their affiliates has a legal obligation to provide financial

support to the Pool at any time.

Before investing in the Ocean State Investment Pool Trust, consider its investment objectives, risks, charges, and expenses. For

additional information, call FIISC at 855-900-OSIP (6747) for a free Investment Circular. To view the Investment Circular online, please go

to https:// institutional.fidelity.com /osip Please read the Investment Circular carefully before you invest. The Investment Circular is the

only authorized source of definitive information regarding investment in the Ocean State Investment Pool Cash Portfolio.

Third-party trademarks and service marks are the property of their respective owners. All other trademarks and service marks are the property of

FMR LLC or an affiliated company.

Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917

Not FDIC insured. May lose value. No bank guarantee. 787386.1.0

Documents

Ocean State Investment Pool - Rhode Islanddata.treasury.ri.gov/dataset/5f706bb9-ab48-4c41-b6... · 3.0 3.5 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19)