Transcription
County of AlamedaInvestment PolicyYear 2020Henry C. LevyTreasurer-Tax Collector
Introduction and Overview of the County of Alameda.3Governing Authority .3Delegation of Authority and Investment Responsibility .3Policy Statement .3Scope .3Primary Investment Objectives .4Primary Investment Philosophy .4Standard of Prudence .4Allowable Investments.5Other Investments .9Credit Rating Information .9Socially Responsible Investment Objectives .9Securities Lending .9Prohibited Investments and Transactions .10Diversification Parameters.10Maturity Parameters.10Investment Procedures .10Performance Information .10Directed Investments and Withdrawal Policy.11Other Provisions.11Investment Reporting and Review.12Ethics and Conflicts of Interest .12Internal Controls .13Internal and External Audit .13Safekeeping and Custody .13Authorized Financial Institutions, Depositories, and Broker/Dealers .13Allocation of Investment Income and Costs .14Treasury Oversight Committee .14Limit on Receipt of Honoraria, Gifts and Gratuities.14Business Continuity .15Investment Policy Adoption .15Conclusion .15SUMMARY OF ALLOWABLE INVESTMENTS .16RATINGS INTERPRETATION .17
3Introduction and Overview of the County of AlamedaThe County of Alameda is a political subdivision of the State of California in the San Francisco BayArea formed in 1853. The County covers an area of approximately 821 square miles in the Bay Areaof the State, and it is the 20th largest County (by population) in the United States. The City ofOakland, the County seat, is one of the most populous cities in the State.Governing AuthorityThe County of Alameda is governed by a five-member Board of Supervisors, each of whom iselected on a non-partisan basis from a separate district where he/she lives. Within the broad limitsestablished by the State Constitution, State General Law, and the Alameda County Charter, theBoard exercises both the legislative and the executive functions of government. The Board ofSupervisors is also the governing body for a number of "special districts" within Alameda County.Delegation of Authority and Investment ResponsibilityThe Alameda County Board of Supervisors, by Ordinance # O-2019-57 adopted on November 26,2019 has renewed the annual delegation of its investment authority and responsibility to investand/or to reinvest the funds in the Alameda County treasury to the Alameda County Treasurer.Accordingly, to provide a framework for the oversight of the Treasurer’s investmentresponsibilities and activities, the Government Code of the State of California through Section27133 requires the Treasurer to prepare an annual investment policy that provides the specificguidelines, pursuant to which, the Treasurer should carry-out investment-related functions.Policy StatementThe purpose of this Investment Policy is to establish investment guidelines for the Treasurer, towhom the Board of Supervisors annually delegates the responsibility for the stewardship of theCounty’s Investment Program. Each transaction and the entire portfolio must comply withapplicable California Government Code, County Ordinances, and this Policy. All investmentprogram activities will be judged by the standards of the Policy and ranking of Primary InvestmentObjectives. Those activities that violate its spirit and intent will be deemed to be contrary to thePolicy. This Policy shall remain in effect until the Board of Supervisors approves a subsequentrevision.ScopeThis Investment Policy applies to all funds over which the Treasurer has been delegated thefiduciary responsibility and direct control for its management.3County of Alameda Investment Policy – 2020
4Primary Investment ObjectivesThe Treasurer shall invest monies in the treasury in accordance with the following basic principlesof investing, in the order of priority:1. Safety: Safety of principal is the foremost objective of the investment program.Investments shall be undertaken in a manner that seeks to ensure the preservation ofcapital in the overall portfolio. To attain this objective, diversification is required in orderthat potential losses on individual securities do not exceed the income generated from theremainder of the portfolio.2. Liquidity: The investment portfolio shall remain sufficiently liquid to meet all operatingrequirements that may be reasonably anticipated. This objective shall be achieved bymatching investment maturities with forecasted cash outflows and maintaining anadditional liquidity buffer for unexpected expenditures.3. Investment Income: The investment portfolio shall be designed with the objective ofattaining a market rate of investment income throughout budgetary and economic cycles,considering the investment risk constraints of safety, while bearing in mind the cash-flowcharacteristics and operating cash needs of County departments, the County’s varioussubdivisions, school districts and special districts.Primary Investment PhilosophySecurities shall generally be held until maturity, with the following exceptions:1. A security with declining credit may be sold early to minimize loss of principal.2. Liquidity needs of the portfolio require that the security be sold.3. A security swap would improve the quality, yield, or target duration in the portfolio.Standard of PrudenceThe standard of prudence to be used by the Treasurer shall be the Prudent Investor Standard asset forth by California Government Code, Section 53600.3 and 27000.3. The Section reads asfollows: The Prudent Investor Standard states that when investing, reinvesting, purchasing,acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill,prudence, and diligence under the circumstances then prevailing, including, but not limited to,the general economic conditions and the anticipated needs of the Treasurer, that a prudentperson acting in a like capacity and familiarity with those matters would use in the conduct offunds of a like character and with like aims, to safeguard the principal and maintain the liquidityneeds of the Treasurer.This standard of prudence shall be applied in the context of managing those investments that fallunder the Treasurer’s direct control. Investment officers acting in accordance with written4County of Alameda Investment Policy – 2020
5procedures and this Investment Policy and exercising due diligence shall be relieved of personalresponsibility for an individual security’s credit risk or market price changes provided thatdeviations from expectations are reported in a timely fashion and appropriate action is taken tocontrol adverse developments.Allowable InvestmentsSection 53600 et seq. of the Government Code of the State of California prescribes the statutoryrequirements relating to investments by local treasurers, including types of allowableinvestments, proportional limits by investment type relative to the size of the investment pool,maximum maturity of investments, and credit rating criteria. The term to maturity of investmentsin the pool shall not exceed a final maturity of 5 years from date of purchase, except whenspecifically authorized by a resolution of the Alameda County Board of Supervisors. Final maturitylimits, investment type limits, and issuer ratings and limits are calculated/considered at time ofpurchase.The investments shall conform to the legal provisions set forth in the Government Code, exceptthat, the County further prescribes the following requirements:(Please refer to Attachment I - SUMMARY OF ALLOWABLE INVESTMENTS)U.S. Treasury Obligations or backed by the full faith and credit of the United StatesMaximum Term:5 yearsMaximum Type Allocation:Not applicableMaximum Issuer Concentration:Not applicableMinimum Issuer Rating:Not applicableU.S. Federal AgenciesMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Money Market Mutual FundsMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Fund Rating:5 yearsNot applicableNot applicableNot applicableOther:1 day20%10%AAA equivalent or better by two or more NationallyRecognized Statistical Ratings Organizations (NRSRO)Maintain a consistent net asset value (NAV) of 1.00Commercial PaperMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:270 days25%10% in aggregate with corporate notes/bonds and CDs5County of Alameda Investment Policy – 2020
6Minimum Issuer Rating:Other:A-1, P-1, F-1 equivalent or better by a NRSROIssuer must meet the following criteria: Is organized andoperating in the United States as a general corporation, hastotal assets in excess of 500 million, has debt other thancommercial paper, if any, that is rated in a rating category of“A” or its equivalent or higher by an NRSRO, or;is organized within the United States as a special purposecorporation, trust, or limited liability company, and hasprogram wide credit enhancements including, but not limitedto, overcollateralization, letters of credit, or a surety bond.Negotiable Certificates of DepositMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Other:Medium-Term Corporate NotesMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Other:Asset-Backed SecuritiesMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Other:1 year30%10% in aggregate with corporate notes/bonds and CPA-1, P-1, F-1 equivalent or better by a NRSROIssued by a nationally or state-chartered bank, a savingsassociation or a federal association, a state or federal creditunion, or by a federally licensed or state-licensed branch of aforeign bank5 years30%10% in aggregate with CDs and CPA category, equivalent or betterIssued by corporations organized and operating within theUnited States, depository institutions licensed by the UnitedStates, or any state and operating within the United States5 years20%5%AAA equivalent by a NRSROEquipment lease-backed certificates, consumer receivablepass-through certificates or consumer receivable-backedbonds are eligible for purchase.State and Local Government ObligationsMaximum Term:5 yearsMaximum Type Allocation20%Maximum Issuer Concentration:5%6County of Alameda Investment Policy – 2020
7Minimum Issuer Rating:Other:A equivalent or better by one NRSROIssued by State and local governments in the United States.Repurchase AgreementsMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Collateral:Other:Reverse Repurchase AgreementsMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Other:Banker’s AcceptancesMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Other:SupranationalsMaximum Term:Maximum Type AllocationMaximum Issuer Concentration:Minimum Issuer Rating:Other:180 days20%Not applicableNot applicable102%, by Treasury or Agency securities with a final maturityof 5 years of less, marked-to-market daily.Counter-party requirements: A financial institution that willdeliver the securities versus payment, either to theTreasurer’s custodian bank or to a third-party custodian.180 days20%Not applicableNot applicableBorrowing for leveraging purposes shall conform in allaspects to the governing provisions of the Government CodeSection 53601, et. seq. Reverse repurchase agreementswhich have been entered for purposes of either raisingtemporary cash needs or for the purpose of leveraging toattain favorable investment spreads, must be approved bythe Board of Supervisors, pursuant to Government Codeguidelines.180 days30%10%A-1, P-1, F-1 equivalent or better by a NRSRODrawn on and accepted by a commercial bank5 years30%15%AA equivalent or better by a NRSROPurchase of U.S. dollar denominated senior unsecuredunsubordinated obligations issued or unconditionallyguaranteed by the International Bank of Reconstruction and7County of Alameda Investment Policy – 2020
8Development (IBRD), International Finance Corporation (IFC),or Inter-American Development Bank (IADB) that are eligiblefor purchase or sale in the United States.Local Agency Investment Fund (LAIF)Maximum Term:1 dayMaximum Type AllocationCurrent State limitMinimum Issuer Rating:Not applicableCalTRUST (Joint Powers Authority Investment Trust for California Public Agencies)Maximum Term:1 dayMaximum Type AllocationTwice the limit of LAIFMinimum Issuer Rating:Not applicableCAMP (Joint Powers Authority created to provide a statewide local government investment pool)Maximum Term:1 dayMaximum Type AllocationTwice the limit of LAIFMinimum Issuer Rating:Not applicableCollateralized/FDIC Insured Time DepositsMaximum Term:5 yearsMaximum Type Allocation30%Maximum Issuer Concentration:FDIC limitMinimum Issuer Rating:Not applicableOther:The Treasurer may place interest-bearing time deposits withbanks and or credit unions located within the State ofCalifornia, collateralized in accordance with requirements ofthe Government Code. Further, pursuant to the requirementof Government Code Section 53635.2, to be eligible as adepository of local agency monies, the depository institutionmust have a CRA (Community Reinvestment Act) rating of“Satisfactory” or better in its most recent evaluation byFFIEC. The bank may use a private sector entity to help placedeposits with banks or credit union located in the UnitedStates.Collateralized Money Market Bank AccountsMaximum Term:1 dayMaximum Type Allocation30%Maximum Issuer Concentration:20%Minimum Issuer Rating:Not applicableOther:The Treasurer may deposit funds in interest-bearingcollateralized money market bank accounts in banks or credit8County of Alameda Investment Policy – 2020
9unions that qualify under the eligibility requirementsrequired for collateralized/FDIC insured time deposits.Deposits in money market bank accounts are made toprovide better short-term yield and over-night liquidity.Other InvestmentsAny other legally permitted investments by specific authorizing resolutions of the AlamedaCounty Board of Supervisors shall be eligible investments.Credit Rating InformationCredit rating requirements for eligible securities referred-to in this policy shall mean the numeric,alpha, and/or alpha-numeric designations assigned by the following National RecognizedStatistical Rating Organizations (NRSRO) rating agencies: Moody’s Investor Service Standard & Poor’s Rating Services Fitch IBCA, Inc. Thompson Bank WatchA list of possible ratings for Standard and Poor’s, Moody’s and Fitch are in Attachment II - RATINGSINTERPRETATIONSocially Responsible Investment ObjectivesIn addition to and subordinate to the objectives set forth in the County’s Primary InvestmentObjectives, the Treasurer seeks to implement a policy of responsible investment, which is astrategy and practice to incorporate environmental, social and governance (ESG) factors ininvestment decisions. Investments will be made with responsible investment goals to the extentthat such investments achieve substantially equivalent safety, liquidity and yield compared toother investment opportunities available at the same time.The Treasurer will actively incorporate ESG factors in its investment analysis and decision-makingprocess and will work to enhance its effectiveness in implementing the principles of responsibleinvesting.Within the guidance for responsible investing, the Treasurer will consider additional sociallyresponsible and impact investing criteria. Such criteria shall be consistent with valuespromulgated by the County of Alameda.Securities LendingPursuant to Section 53601 (j) (3) of the Government Code, the Treasurer may engage in securitieslending through a third-party custodian and lending administrator. Revenues derived from9County of Alameda Investment Policy – 2020
10securities lending will be considered incremental investment income to be shared amongparticipating funds in the investment pool.Prohibited Investments and TransactionsThe following are prohibited investments and transactions: Range notes Inverse floating rate securities Step-down securities Short selling Any security that could result in zero interest accrual if held to maturityDiversification ParametersThe investment program shall follow the following diversification parameters: Issuer: No more 10% in aggregate corporate exposure (CD, CP, Corporate Notes) Floating Rate, Structured Notes, and Other Derivative Securities: No more than 15%Maturity ParametersThe investment program shall follow the following maturity parameters: Weighted Average Maturity no greater than 3 years (using stated final maturity) At least 10% of the County Investment Pool maturing within 90 daysInvestment ProceduresThe Treasurer has written procedures for the operation of the investment program. Theprocedures include such items as delegation of duties/authority, reconciliation, trade settlement,investment strategy/selection, compliance monitoring, reporting, and internal controls.Performance InformationThe investment portfolio shall be designed with the objective of obtaining a market rate of returnthroughout budgetary and economic cycles, commensurate with the investment risk constraintsand the cash flow needs of the County. The County’s investment strategy is conservative and isreflected in its general “hold to maturity” philosophy. Given this strategy, the Treasurer shalldevelop an appropriate custom benchmark for investment considerations which shall reflect theprominent and persistent characteristics of the portfolio over time. The benchmark will beadjusted periodically when material changes take place regarding asset allocation and/orduration.10County of Alameda Investment Policy – 2020
11Directed Investments and Withdrawal PolicySchool Districts and Community College DistrictsPursuant to Education Code section 15146(g), at no time shall bond proceeds be withdrawn bythe school districts or community college districts for investment outside the county treasury.Special DistrictsSelf-directed investments made by any special district, including deposits by same districts intothe State’s Local Agency Investment Fund (LAIF) are considered withdrawal of funds from theCounty treasury. Each special district withdrawing funds for the purpose of investing outside ofthe Treasurer’s investment pool may only do so once each month, upon a 3-day written noticeto the Treasurer in an amount not exceeding 20,000,000. Such withdrawal is hereafter referredto as a “Permissible Withdrawal”. Permissible withdrawals are further subject to the followingrequirements: Each special district wishing to invest bond proceeds and/or bond funds outside of theTreasurer’s investment pool, must notify the Treasurer no later than on the day of thebond closing, so that the Treasurer could place such bond proceeds in short-terminvestment/s whose maturity would coincide with the settlement/purchase date of thedirected investment.Securities representing district- directed investments shall be held solely for the purposeof safekeeping by the County Treasurer at the County’s custodial bank.Directed investments shall be the direct responsibility of each respective district withrespect to their accounting and accountability.Other ProvisionsFurther, the Treasurer sets forth the following:1. The Treasurer shall maintain sufficient funds in the County Treasury, to meet theestimated normal daily operating cash demands of the County and investment poolparticipants by investing funds to maturities that anticipate major cash needs.Investments shall, whenever possible, be made in securities that have active secondary orresale markets to provide maximum portfolio liquidity.2. The Treasurer’s investment pool practices a “buy and hold” strategy, thus, funds areinvested in securities that mature on dates coincident with the anticipated operating cashrequirements of all participating entities. Consequently, withdrawal of funds for purposesother than to pay operating expenditures is unanticipated and could risk the pool’sliquidity and stability. Nevertheless, subject to the Directed Investments and WithdrawalPolicy, the Treasurer may liquidate securities to meet unanticipated cash withdrawals ordisbursements made by the County or any pool participant, whether the purpose of suchwithdrawal or disbursement is to make payment for a legitimate obligation or to pull outfunds to reinvest outside the Treasurer’s pool. Except for permissible withdrawals as11County of Alameda Investment Policy – 2020
12described in the previous section, in the event the Treasurer is obligated to liquidateinvestments in an adverse market due to a withdrawal for the purpose of investing fundsoutside of the Treasurer’s investment pool, the resulting loss, if any, shall be borne by thewithdrawing district alone. Losses due to the sale of securities to meet unanticipated cashneeds other than for investing funds outside the Treasurer’s pool shall be considered as anormal cost of providing unanticipated liquidity needs.3. The Treasurer shall hold all securities including collateral on repurchase agreements, insafekeeping with the County’s custodial bank or with a national bank located in a FederalReserve City which has provided the County with a safekeeping agreement.4. Pursuant to Government Code Section 53684(a) and unless otherwise provided by law, ifthe treasurer of any local agency, or other official responsible for the funds of the localagency, determines that the local agency has excess funds which are not required forimmediate use, the treasurer or other official may, upon the adoption of a resolution bythe legislative or governing body of the local agency authorizing the investment of fundspursuant to this section and with the consent of the County Treasurer, deposit the excessfunds in the county treasury for the purpose of investment by the county treasurerpursuant to Section 53601 or 53635, or Section 20822 of the Revenue and Taxation Codeafter signing an Investment Management Agreement.Investment Reporting and ReviewThe Treasurer shall submit a report on the monthly transactions and the status of the investmentpool to the Alameda County Board of Supervisors, the Treasurer’s Oversight Committee and theparticipating districts. The investment report must include the book and market value of securitiesheld, income received, book yield, duration, liquidity profile, and investment policy compliance.Ethics and Conflicts of InterestOfficers and employees involved in the investment process shall refrain from personal activity thatcould conflict with the proper execution and management of the investment program, or thatcould impair their ability to make impartial investment decisions. Employees and investmentofficials shall disclose any material interests in financial institutions with which they conductbusiness. Disclosure shall be made to the governing body. They shall further disclose any personalfinancial/investment positions that could be related to the performance of the investmentportfolio. Employees and officers shall refrain from undertaking any personal investmenttransactions with the same individual with whom business is conducted on behalf of theTreasurer’s investment pool.Further, any securities broker or dealer who has made a political contribution to the Treasurer,any member of the Board of Supervisors, or any candidate for those offices, in an amount thatexceeds the limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board12County of Alameda Investment Policy – 2020
13within any consecutive 48-month period following January 1, 1996, shall be disqualified fromtransacting securities trades (purchase, sale and/or exchange) with the Treasurer.Internal ControlsThe Treasurer shall employ internal controls designed to prevent losses of public funds arising fromfraud, employee error, misrepresentations by third parties, or imprudent actions by employeesand officers of County.Internal and External AuditThe custodian/safekeeping account, investment transactions, and records shall be audited at leastquarterly by internal auditors independent of the Treasurer and/or by outside independentauditors and the audit results reported to the members of the Treasury Oversight Committee,Board of Supervisors, or the Auditor-Controller. Pursuant to the Treasury Oversight Committeemandate, the investment pool shall be audited annually by an independent auditor and the resultsreported to the members of the Treasury Oversight Committee, the Board of Supervisors, theGrand Jury, the Auditor-Controller, and all participating entities in the investment pool as governedby state law.Safekeeping and CustodyThe following process shall be maintained for safekeeping and custody of securities:1. All trades of marketable securities will be executed (cleared and settled) on a delivery vs.payment (DVP) basis to ensure that securities are deposited in the Alameda County’ssafekeeping institution prior to the release of funds.2. All marketable securities except for money market funds registered in the County’s nameshall be deposited for safekeeping with banks contracted to provide the Treasurer withcustodial security clearance services. Securities are NOT to be held in investmentfirm/broker-dealer account.Authorized Financial Institutions, Depositories, and Broker/DealersThe Treasurer shall maintain a list of financial institutions and depositories authorized to provideinvestment services. In addition, a list will be maintained of broker/dealers that are approved toconduct investment security transactions with the Treasurer. These may include primary dealers,regional broker/dealers, minority-owned broker/dealers and direct issuers of securities.All financial institutions and depositories, including broker-dealers, must provide certification ofhaving read and understood and agreeing to comply with the Treasurer’s investment policy on anannual basis.13County of Alameda Investment Policy – 2020
14All broker/dealers who desire to become qualified for investment transactions must supply thefollowing (as appropriate):1. Audited financial statem
established by the State Constitution, State General Law, and the Alameda County Charter, the Board exercises both the legislative and the executive functions of government. The Board of Supervisors is also the governing body for a number of "special districts" within Alameda County. Delegation of Authority and Investment Responsibility
