The return on the City of Richmond’s investments – totalling about $1.25 billion in reserves – was down by about $7 million in 2020 due to financial volatility.
The overall rate of return on Richmond investments was 1.8 per cent in 2020, down from 2.45 per cent in 2019.
Return on investments in 2020 was about $23 million – in 2019, this was about $30 million.
The city’s reserves include $528 million in cash and $824 million in investments like term deposits and fixed-income bonds.
The COVID-19 pandemic caused markets to be volatile in 2020 with the federal government putting in stabilization measures.
Overnight interest rates dropped in March 2020 from 1.25 per cent to 0.25 per cent – a lower overnight rate allows people to borrow money from banks at a lower rate but influences investment returns.
According to a report going to the finance committee next week, staff monitored the situation to ensure “capital preservation and liquidity” while optimizing investment yield in “the historically low interest rate environment.”
About 60 per cent of the reserve funds is earmarked for specific projects while about 40 per cent is in “uncommitted reserves,” for specified future projects that have to be approved by council.
The city is expecting “choppy” growth in 2021, which will be influenced by COVID-19, vaccine success and the impact of these on consumer and business confidence.
At the end of 2020, the city had $1.35 billion in its investment accounts.
