HomeMy WebLinkAbout5BCITY COUNCIL STAFF REPORT
DATE: April 8, 2021 NEW BUSINESS
SUBJECT: CONSIDERATION AND ADOPTION OF REVISIONS TO THE CITY'S
INVESTMENT POLICY
FROM:
BY:
David Ready, City Manager
Department of Finance and Treasury
SUMMARY
Government Code 53646(1 )(2) provides for the City Council's annual consideration of the
City's Investment Policy at a public meeting. Additionally, the City Council may elect to
delegate its authority to invest and reinvest City funds to the City Treasurer for up to one
year pursuant to California Code section 53607. The proposed Investment Policy, with
the recommended revisions, and delegation of authority will be effective upon adoption
by the City Council.
RECOMMENDATION:
Adopt a Resolution entitled "A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF PALM SPRINGS, CALIFORNIA, ADOPTING AN INVESTMENT POLICY
GOVERNING THE INVESTMENT OF CITY FUNDS AND SUPERCEEDING
RESOLUTION NO. 24438", and delegating the City Council's authority to invest and
reinvest public funds, and to sell or exchange securities so purchased, to the City
Treasurer for one year or until earlier revoked by the City Council.
STAFF ANALYSIS:
The City of Palm Springs has had an investment policy since 1985. The Treasurer and
Finance Department staff ensure that all investments are consistent with the Investment
Policy and provide oversight with appropriate checks and balances over"the investment
process. The Policy requires annual adoption by City Council. On January 28, 2021, the
City Council approved appointment of Chandler Asset Management (CAM) to provide
ITEMNO. '51:>
1
City Council Finance and Investment Standing Subcommittee Staff Report
April 8, 2021 --Page 2
Approval of the City's Investment Policy
investment advisory services to the City. Although Chandler Asset Management will work
with staff to actively manage the portion of the City's cash portfolio not needed to meet
near-term obligations, fiduciary responsibility for investments remains with the City.
In collaboration with the City of Palm Springs' investment advisor, Chandler Asset
Management, finance staff recently reviewed and updated the City's investment policy to
capture recent changes to California Government Code (Code) sections that govern the
investment of public funds. Staff also reviewed to policy to ensure inclusion of the latest
best practices from recognized industry groups such as Government Finance Officers
Association (GFOA), California Society of Municipal Finance Officers (CSMFO),
California Municipal Treasurers Association (CMTA), and the Association of Public
Treasurers of the United States and Canada (APTUSC).
During that review, recommendations were proposed by Chandler Asset Management
and staff to modify language, allow consistency with updated State statues, and to enable
the portfolio to transition from passive management (hold all securities until maturity) to
active management (responsive to changing market conditions). The Investment Portfolio
will continue to be managed with the policy prioritization of Safety first, Liquidity second,
and Return on Investment third.
Details of the recommended changes can be located, redlined, on Exhibit A. Summary
revisions to the proposed Policy include:
• Section 9: Cash and Investments:
o Commercial Paper: CAM recommends adjusting the max percentage of
portfolio to 40% consistent with the passing of SB 998
o Medium-Term Corporate Notes: CAM recommends moving downgrade
language to Section 12: Risk Management and Diversification
o Pass-Through Securities: CAM recommends adding Pass-Through
Securities (Asset Backed, Mortgage Backed and Collateralized Mortgage
Obligations) as permittable investments with maximum maturity of 5 years,
maximum percentage of portfolio of 20% and maximum exposure of 5% per
issuer
o Supranational Securities: CAM recommends adding Supranational
Securities as a permittable investment with maximum maturity of 5 years,
maximum percentage of portfolio of 30% and maximum exposure of 10%
per issuer
• Section 9.3: Prohibited Investments
o CAM recommends updating language to be consistent with the passing of
SB 998 for the approval of investing in negative yield investments issued or
back by the US government.
2
City Council Finance and Investment Standing Subcommittee Staff Report
April 8 , 2021 --Page 3
Approval of the City's Investment Policy
• Section 10: Portfolio Adjustments
o CAM recommends moving the language of this section to Section 12: Risk
Management and Diversification, to be in line with best practice
• Section 12: Risk Management and Diversification
o CAM recommends merging Section 1 O Portfolio Adjustments and Section
13 Diversification into new Section 12 Risk Management and
Diversification. This recommendation is in line with standard best practices
defining the mitigation of risk in the portfolio, issuer limitation, downgrade
language and portfolio duration in line with a market benchmark.
• Section 14 Maximum Maturities:
o CAM recommends removal of WAM limitation to be in line with standard
best practices .
• Glossary
o CAM recommends the inclusion of new terms to the Glossary
Pursuant to the delegation of authority authorized by Government Code section 53607,
The Treasurer is required to make a monthly report of investment transactions to the City
Council. Each monthly Cash and Investments Report ('Treasurer's Report") describes
the portfolio's composition and recent performance, and reports the month's investment
transactions. Within each Treasurer's Report, the Treasurer certifies that all investments
were made in compliance with the Investment Policy and that there are adequate funds
to pay City obligations for at least six months.
FISCAL IMPACT:
Director of Finance & Treasurer
-
J~?alng~)
City Attorney
Attachments:
Resolution
City of Palm Springs Investment Policy (Redlined)
Chandler Asset Management Information
3
RESOLUTION NO. ---
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF PALM SPRINGS, CALIFORNIA, ADOPTING
AN INVESTMENT POLICY GOVERNING THE
INVESTMENT OF CITY FUNDS AND
SUPERCEEDING RESOLUTION NO. 24706.
The City Council funds, approves, and resolves as follows :
Section 1. The City Council finds the Investment Policy is consistent with the City's
commitment to safeguarding public funds; and
Section 2. The City of Palm Springs Investment Policy , attached as Exhibit A and
incorporated by reference, is hereby adopted; and
Section 3. Resolution No . 24706 is hereby superseded in its entirety.
ADOPTED THIS 8th day of April, 2021 .
ATTEST:
Anthony J. Mejia, MMC
City Clerk
David H. Ready, City Manager
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
C
AYES:
NOES:
ABSENT:
ABSTAIN :
ANTHONY J. MEJIA, MMC
CITY CLERK
4
CITY OF PALM SPRINGS
2019-2020
INVESTMENT POLICY
Adopted Jan uary 9, 2020
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1.0 Purpose:
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
The purpose of th is Investment Pol icy (Policy) is to set forth the investment and
operational gu idelines for the management and investment of the public funds of the City
of Palm Springs , California . The Policy requires adoption by , and can only be changed
by, a majority vote of the City Council.
The Po licy is designed to ensure the prudent management of publ ic funds , the availability
of operating and cap ital funds when needed, and an investment total return that is
comparable to established benchmarks , as appropriate .
A copy of th is statement w ill be provided to all investment dealers and investment
managers doing business with the City of Pa lm Springs , and will be provided to other
interested parties on request. Receipt of th is policy , includ ing confirmation that it has been
reviewed by individuals working directly with the City 's investment account will be
received prior to any organization providing investment services to the City of Palm
Springs.
2.0 Policy:
The investment Pol icy and practices of the City of Palm Springs are based upon state law
and prudent money management cons istent with City pol icies . The primary goals of these
practices are :
A. To ensure compliance with all Federal, State, and local laws governing the
investment of publ ic funds under the control of the Director of Finance/Treasurer .
B . To protect the princ ipal of mon ies entrusted to the City 's Finance Department.
C. Achieve a reasonable rate of return with in the parameters of prudent risk
management whi le minimizing the potential for capital losses arising from market
changes or issuer default.
3.0 Scope:
This Investment Policy applies to all financial assets of the City of Palm Springs . These
funds are accounted for in the City's Comprehens ive Annual Financial Report.
The Director of Finance/Treasurer is responsible for investing the unexpended cash in
the City Treasury for all funds , except for the employee's retirement funds or deferred
compensation accounts, wh ich are administered separately , and those funds which are
managed separately by trustees appointed under indenture agreements.
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
These funds include, but are not limited to :
• General Fund
• Special Revenue Funds
• Capital Project Funds
• Debt Service Fund
• Enterprise Funds
• Internal Service Funds
• Trust and Agency Funds
• Bond Proceeds
• Any new fund created by the legislative body , unless specifically exempted
This Investment Policy applies to all transactions invo lving the financial assets and related
activity of the foregoing funds .
4.0 Prudence:
The standard of prudence to be used by the Director of Finance/Treasurer shall be the
"prudent investor standard ." This shall be applied in the context of managing an overall
portfolio. The "prudent investor standard" shall be applied to the City , pursuant to
California Government Code Section 53600 .3 which provides, in pertinent part:
' . . . all governing bodies of local agencies or persons authorized to make
investment decisions on behalf of those local agencies investing public
funds pursuant to this chapter are trustees and therefore fiduciaries
subject to the prudent investor standard. When investing, reinvesting ,
purchasing , acquiring , exchang ing, 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 agency, that a
prudent person acting in a like capacity and familiarity with those matters
would use in the conduct of funds of a like character and with like aims , to
safeguard the principal and maintain the liquidity needs of the agency .... "
4.1 Personal Responsibility:
The Director of Finance/Treasurer, as the investment officer acting in accordance with
written procedures and the Investment Policy and exercising due diligence , shall be
relieved of personal responsibility for an individual security 's credit risk or market
price changes , provided dev iations from expectations are reported to the City Council in
a timely fashion and appropriate action is taken to control adverse developments .
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INVESTMENT POLICY ANO GUIDELINES
5.0 Objective:
Consistent with this aim, investments are made under the terms and conditions of
California Government Code Section 53600, et seq . Criteria for selecting investments and
the absolute order of priority are :
Safety of principal is the foremost objective of the investment program . Investments of
the City of Palm Springs shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective , diversification is
required in order that potential losses on individual securities do not exceed the income
generated from the remainder of the portfolio .
liquidity
The City of Palm Springs's investment portfolio will remain sufficiently liquid to enable the
City to meet all operating requirements which might be reasonably anticipated and to
maintain compliance with any indenture agreement, as applicab le. Liquidity is essential
to the safety of principal.
Return on Investments
The City of Palm Springs's investment portfo li o shall be designed with the objective of
attaining a market-average rate of return throughout budgetary and economic cycles
(market interest rates), within the City's Investment Policy's risk parameters and the City's
cash f low needs . See also Section 16.1 .
6.0 Delegation of Authority:
The Director of Financeffreasurer shall be responsible for all transactions undertaken
and shall establish a system of controls to regulate the activities of subordinate
officials. The responsibility for the day-to-day investment of City funds may be delegated
to other Department of Finance staff members as determined by the Director of
FinancefTreasurer.
Procedures should include references to : ACH/wire transfer agreements , and
collateral/depository agreements, as appropriate . Such procedures shall include explicit
delegation of authority to persons responsible for investment transactions. No person may
engage in an investment transaction except as provided under the terms of this policy
and the procedures established by the Director of FinancefTreasurer. The Director of
FinancefTreasurer shall be responsible for all transactions undertaken and shall establish
a system of controls to regulate the activities of subordinate officials . Under the provisions
of California Government Code 53600 .3, the Director of FinancefTreasurer is a trustee
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
and a fiduciary subject to the prudent investor standard.
The City may engage the services of one or more external investment managers to assist
in the management of the City's investment portfolio in a manner consistent with the City's
Investment Policy and objectives. Such external managers may be granted discretion to
purchase and sell investment securities in accordance with this Investment Policy. Such
managers must be registered under the Investment Advisers Act of 1940.
7.0 Ethics and Conflicts of Interest:
Consistent with state statutes and regulations and the City's local policies relating to
conflicts of interest, all persons involved in the investment process shall refrain from
personal business activity that could conflict with proper execution of the investment
program , or which could impair their ability to make impartial investment decisions .
Employees and investment officers are required to file annual disclosure statements as
required for "public officials who manage public investments' [as defined and required by
the Political Reform Act and related regulations, including Government Code Sections
81000 , et seq ., and the rules , regulations and guidelines promulgated by California's Fair
Political Practices Commission (FPPC)].
8.0 Authorized Financial Dealers and Institutions:
The City's Director of Finance/Treasurer will maintain a list of the financial institutions and
brokers/dealers authorized to provide investment and depository services and will
perform an annual review of the financial condition and registrations of qualified bidders
and require annual audited financial statements to be on file for each company. The City
shall annually send a copy of the current Investment Policy to all financial institutions and
brokers/dealers approved to do business with the City .
If the City uses an external investment adviser, the adviser is authorized to enter into
transactions with its own approved Broker-Dealer list on behalf of the City . The adviser
shall perform all due diligence for all brokers/dea lers on its approved list. The external
investment adviser shall annually provide the City its approved Broker-Dealer list so that
the Director of Finance/Treasurer may conduct their own review.
As far as possible , all money belonging to , or in the custody of, a local agency, including
money paid to the City's Director of Finance/Treasurer or other official to pay the principal,
interest, or penalties of bonds, shall be deposited for safekeeping in state or national
banks, savings associations, federa l associations, credit unions, or federally insured
industrial loan companies in this state selected by the City's Director of
Finance/Treasurer; or may be invested in the investments set forth in Section 9.0. To be
eligible to receive local agency money, a bank , savings association, federal association,
or federally insured industrial loan company shall have received an overall rating of not
s
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
less than "satisfactory" in its most recent evaluation by the appropriate federal financial
supervisory agency of its record of meeting the credit needs of California 's communities,
including low-and moderate-income neighborhoods .
To provide for the optimum yield in the investment of City funds, the City's investment
procedures shall encourage competitive bidding on transactions from approved
brokers/dealers. In order to be approved by the City , the dealer must meet the following
criteria : (i) the dealer must be a "primary" dealer or regional dealer that qualifies under
Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule); (ii) the
dealer's institution must have an office in California; (iii) the dealer must be experienced
in institutional trading practices and familiar with the California Government Code as
related to investments appropriate for the City ; and (iv) all other applicable criteria , as
may be established in the investment procedures. All brokers/dealers and financial
institutions who desire to become qualified bidders for investment transactions must
submit a "Broker/Dealer Application" and related documents relative to eligibility including
a current audited annual financial statement, U4 form for the broker, proof of state
registration and proof of National Association of Securities Dealers certification . The
City's Director of FinancefTreasurer shall have also have received a signed Certification
from the firm of having read and understood the City's Investment Policy and agreeing to
comply with the Investment Policy . The City's Director of FinancefTreasurer shall
determine if they are adequately capitalized (i .e . qualifies under SEC Rule 15C3-1 ,
Uniform Net Capital Rule and five years of operation). If the City uses an external
investment advisor, the investment adviser will use the firm's best execution procedures,
and must retain documentation of competitive pricing execution on each transaction and
provide such documentation to the Director of Finance/Treasurer upon request.
9.0 Cash and Investment Instruments:
City active and inactive deposits may be kept in checking accounts and savings accounts
at financial institutions as identified in California State Government Code Section 53648
provided that they are adequately secured with proper collateral as prescribed by
Government Code Sections 53656 and/or 53658. Funds may be automatically swept from
the above accounts into investment instruments provided those investment instruments
are allowable investments as listed in this section , and limited to the percentage of the
portfolio prescribed for each investment instrument.
Allowable investments for the portfolio of the City of Palm Springs are limited by California
State Government Code Sections 53601 et seq .; and Section 53635 . They are further
restricted by the Director of Finance/Treasurer's investment strategy . Limitations on
percentage of portfolio , single issue or issuer, credit quality, diversification, and maturity
apply at the time of purchase . Purchased securities may not exceed five-year maturities .
Exceptions can only be approved by the City Council. The investment instruments and
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
percentage of the portfolio permitted by this policy are described below. Investments
not specifically listed below are deemed inappropriate and prohibited .
OBLIGATIONS OF THE UNITED STATES TREASURY
United States Treasury notes , bonds, bills , or certificates of indebtedness, or those for
Which the faith and credit of the United States are pledged for the payment of principal
and interest.
• Maximum Maturity: 5 Years
• Maximum Percentage of Portfolio : 100%
BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF
CALIFORNIA OR THE STATE OF CALIFORNIA
Registered California warrants, treasury notes or bonds of this state, including bonds
payable solely out of the revenues from a revenue-producing property owned , controlled
or operated by the state or by a department, board , agency, or authority of the state .
Bonds , notes, warrants or other evidences of indebtedness of any local agency within
California including bonds payable solely out of the revenues from a revenue-producing
property owned , controlled , or operated by the local agency, or by a department , board,
agency , or authority of the local agency. Investments under this section must be rated • A"
or better by a nationally recognized rating service .
• Maximum Percentage of Portfolio : 15%
• Maximum Exposure : 5% per Issuer.
FEDERAL AGENCIES
Obligations issued by banks for cooperatives, federal land banks, federal intermediate
credit banks, federal home loan banks, the Federal Home Loan Bank Board , Federal
Home Loan Mortgage Corporation , Federal Home Loan Bank , Federal Farm Credit Bank ,
the Tennessee Valley Authority, or in obligations , participations , or other instruments of,
or issued by, or fully guaranteed as to principal and interest by, the Federal National
Mortgage Association; or in guaranteed portions of Small Business Administration notes ;
or in obligations , participations, or other instruments of, or issued by, a federal agency or
United States government-sponsored enterprise .
• Maximum Maturity : 5 Years
• Maximum Percentage of Portfolio : 60%
BANKERS'ACCEPTANCES
Bills of exchange or time drafts drawn on and accepted by a commercial bank, typically
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
created from a letter of credit issued in a foreign trade transaction . Eligibility is limited to
U.S. banking corporations .
• Maximum Maturity: 180 Days
• Maximum Percentage of Portfolio: 20%
• Maximum Exposure : 5% per bank
• Credit Requirement: A-1, P-1 , F-1 (Per S&P/ Moody's /Fitch)
COMMERCIAL PAPER
Commercial Paper ranked A-1, P-1, F-1 by one of the major rating agencies and issued
by a domestic corporation having assets in excess of $500,000,000 and having an "A " or
better rating on its long term debentures , if any, as determined by a recognized national
rating agency.
• Maximum Maturity : 270 Days
• Maximum Percentage of Portfolio: 15% Under a provision sunsetting on January
1, 2026. no more than 40% of the portfolio may be invested in Commercial Paper
if the Agency's investment assets under management are greater than
$100,000,000.
. u . -~ -., • . "' r=--01 I
·..:.1 --....
• Maximum Exposure : 5% per Issuer
• Credit Requirement A-1 . P-1 , F-1 (Per S&P/ Moody's I Fitch)
NEGOTIABLE CERTIFICATES OF DEPOSIT
Negotiable certificates of deposit issued by a nationally or state-chartered bank , a savings
association or a federal association, a state or federal credit union, or by a state-licensed
branch of a foreign bank . Securities in this category exceeding federal deposit insurance
limits shall be rated or issued by institutions which have long-term debt obligations rated
"A" (or the equivalent) or better and short-term debt obligations , if any, rated "A-1 ' (or the
equivalent) or better by at least two nationally recognized statistical rating agencies.
• Maximum Maturity: 5 Years
• Maximum Percentage of Portfolio : 30%
• Maximum Exposure: 5% per Issuer
• FDIC-insured up to $250,000
• Credit Requirement if over $250,000: Rating of "A' or the equivalent (Per S&P/
Moody's I Fitch)
MEDIUM-TERM CORPORATE NOTES
Medium term notes, defined as all corporate and depository institution debt securities with
8
Commented [CM1 J: Updat ing to be In line w i th SB 998 ]
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
a maximum remain ing maturity of five years or less , issued by corporat ions organized
and operat ing within the United States or by depository institutions licensed by the Un ited
States or any state and operating within the United States . Notes eligible for investment
under this subsection must be rated "A" or better by a nationally recognized rat ing serv ice
at the time of purchase .
~f U1e SFeElit FatiA!} of a 68Gl:1Fily falls 9818\+l tl=le "BBB ' €jFaEle, it ffll:ISt ee 6819 aAEI Feffl81,'89
from tl=le Gity PSFtfelie 1:1Aless ll=le Gity G8l:IAGil aJ:lJ:lF8¥86 ll=le QiF8st8F of
FiAaAse/+FeaSl:IFeF's F8GORIRl8A9alioA U:iat tAe seSl:IFily SROl:119 ee FetaiAeS. QiF86l8F ef
FinaAse/+roasl:IFeF will Rl8Ai!OF aAS F0J:l8rt slatl:IS of Sl:IGR S0Gl:IFily le Gity GOl:IAGil 8A eaGR
-.. , --..J -·--· ___ ... ·-~ u, "I Co mmented (CM2]: Downgrad e la nguage In t his sec t ion ] -._, ,---,--·-----·-·
m ov ed to sect ion 12.D Risk Management an d Di versification . Maximum Maturity: 5 Years . Maximum Percentage of Portfolio : 30% . Maximum Exposure : 5% per Issuer
fASS-THROUGH SECURITIES
Asset-Backed, Mortgage-Backed, Mortgage Pass-Through Securities, and
Cotlateralized Mortgage Obligations limited to mortgage-backed 12ass-through securities
issued b:r: a US government agenc:r: or consumer receivable gass-through certificates or
bonds with a final maturit:r: not exceeding five :r:ears from the date of trade settlement.
The securities are rated in a rating categoi:y of "AA" or its eguivalent or higher b:r: a
NRSRO . The aggregate investment in mortgage-backed and asset-backed securities
described in this section shall not exceed 20% of the gortfolio with no more than 5%
held in an:r: one issuer that is not a US government agenc:r:.
. Maximum Maturit:r:: 5 Years . Maximum Percentage of Portfolio : 20% . Maximum Exgosure: 5% ger Issuer
SUPRANATIONAL SECURITIES
Medium United States dollar denominated senior unsecured unsubordinated obligations
issued or unconditionall:r: guaranteed b:r: the International Bank for Reconstruction and
Develo12ment, International Finance Corgoration, or Inter-American Develo12ment Bank,
with a maximum remaioing maturit:t: of five :i:ears or less, and eligible for 12urchase and
sale within the United States. Investments under this subdivision shall be rated in a eating
categoi:y of 'AA' or its eguivalent or higher b:r: a NRSRO and shall not exceed 30% of the
12ortfolio with no more than 10% invested in an:r: one issuer.
. Maximum Maturit:r:: 5 Years . Maximum Percentage of Portfolio: 30% . Maximum Exoosure : 10% oer Issue ~ Commented (CM3): CAM recommends the inclu sion of I Pass-Thru and Su pranati onal se curit ies
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
MUTUAL FUNDS AND MONEY MARKET MUTUAL FUNDS
California Government Code Sections 53601 (k) permits public agencies to invest 20%
of their portfolio in mutual funds or money market. Money market funds are limited to a
maximum dollar-weighted average maturity of 90 days; each investment must have a
remaining maturity of thirteen months or less at time of purchase; and the fund must strive
to maintain a constant net asset value of $1 .00 . These restrictions are designed to protect
assets from a loss in value that can result from substantial increases in interest rates.
The California Government Code Section 53601 (k) (2) permits public agencies to invest
in "shares of beneficial interest issued by diversified management companies that
are money market f unds registered with the Securities and Exchange Commission under
the Investment Company Act of 1940 (15 U.S.C. Sec. B0a-1, et seq .) as long as the
company shall have met either of the following criteria: (A} Attained the highest
ranking or the highest letter and numerical rating provided by not less than two
nationally recognized statistical rating organizations or (B) Retained an investment
advisor registered or exempt from registration with the Securities and Exchange
Commission with no less than five years' experience investing in the securities and
obligations authorized by subdivisions (a} to (j), inclusive, or subdivisions (m) or (n) and
with assets under management in excess of five hundred million dollars ($500 ,000,000)."
• Maximum Percentage of Portfolio : 10 %
The California Government Code Section 53601 (p) permits public agencies to invest in
"shares of beneficial interest issued by a joint powers authority organized pursuant to
Section 6509 .7 that invests in the securities and obligations authorized in subdivisions (a)
to (o}, indusive . Each share shall represent an equal proportional interest in the
underlying pool of securities owned by the joint powers authority. To be eligible under this
section , the joint powers authority issuing the shares shall have retained an investment
adviser that meets all of the following criteria : ( 1) The adviser is registered or exempt from
registration with the Securities and Exchange Commission; (2) The adviser has not less
than five years of experience investing in the securities and obligations authorized in
subdivisions (a} to (o}, inclusive; and (3) The adviser has assets under management in
excess of five hundred million dollars ($500 ,000,000)."
• Duration : Less than 1 year ; Maximum Percentage of Portfolio : 50%
• Duration: More than 1 year; Maximum Percentage of Portfolio: 25%
TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of deposit.)
Time deposits , non-negotiable and collateralized in accordance with the Californ ia
Government Code, may be purchased through banks or sav ings and loan associations
with an "A" or better rating .
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
• Maximum Maturity : 1 Year
• Maximum Perce ntage of Portfo li o : 10%
• Maximum Exposure : $500,000 per Issuer
THE LOCAL AGENCY INVESTMENT FUND {LA IF)
A pooled investment fund managed by the State T reasurer's Office , which operates like
a money market fund for the exclusive benefit of governmental entities with in California .
• Maximum of Portfo li o: Maxi mum set by LAIF
9.1 Bond Proceeds
In addition to the investment vehicles enumerated in Section 9 .0 , the p roceeds of bond
issues (including reserve funds) may be invested in long term Guaranteed Investment
Contracts (GIC), Investment Agreements (IA), or other Structured Products (SP) that
comply with the Permitted Investment restrictions of the particular bond issue .
Before soli citing bids from providers of GIC's , IA's , or SP 's , the Director of
Finance/Treasurer shall obta in approval from the City Council to proceed .
9.2 Investment Pools:
The City 's D irector of Finance/Treasurer or designee shall be requ ired to investigate all
loca l govern ment investment pools and money market mutual funds pri or to investing and
performing an annual rev iew thereafter wh ile the City is invested in the pool or the money
market fund . LAIF is authorized under provisions i n Section 16429.1 of the Cal ifornia
Government Code as an allowable i nvestment for local agencies even though some of
the individual investments of the pool are not all owed as a direct investment by a loca l
agency .
9.3 Prohibited Investments:
Under the provisions of Cal ifo rni a Government Code Sections 53601 .6 and 53631 .5, the
City of Palm Springs shall not invest any funds covered by this Investment Policy in
i nve rse floaters , dual index , stepped inverse derivatives, repurchase agreements, reverse
repurchase agreements, range notes, interest-only stri ps derived from mortgage pools ,
stock in any joint company , corporation or associati on , or any investment that may resu lt
in a zero interest accrual if held to maturity. Under a provision sunsetting on January 1.
2026 securities backed bv the U.S . Government that c.ould result in a zero-or neaative-
interest accrual if held to maturitv are oermitted.l
9.4 Social Responsibility:
The C ity shall not knowing ly make any i nvestments in any institution , company ,
11
Commented (C M 4J: Addition of language approved by ]
the pass lns of SB 998
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
corporation , subs idiary , or affil iate that practices or suppo rt s directly or ind irectly through
its actions , discriminat ion on the bas is of race , reli gion , co lor, creed, national or ethn ic
or igin , age , sex , sexua l orienta ti on, or physical disab ili ty , as this is not in accordance with
the City of Pa l m Springs policies rega rding discrim inat ion .
Investments are encouraged in entities that support community we ll -being throug h safe
and environmentally sou nd practices and fa ir labor practices . Investments are
encou raged in entities that support equa lity of rights regarding race , religion , color , c reed ,
national or ethn ic origin , age , sex , sexual ori entation , or physical disabi lity . Investments
should be made to the extent reasonable under the circumstances that such soc ially
respons ible investments meet minimum permitted requirements by state law , and achieve
substantially equivalent safety , liqu idity , and yield when compa red to sim il ar investments
permitted by state law.
Pr ior to making investments the City 's Di rector of Fi nanceffreasu rer 's office will
reasonably ve ri fy an entity's support of the soc ially respons ible goals listed above through
direct contact or throug h the use of a third party resource .
~o.o Port:felio .OC,djuslmeAts:
Perioelio f.)UFGl=lase anel sale b=ansaotions may be e>Eeouleel to ali§n tt:le f.)Ortfolio witt:I tt:lo
City's stateel strate§iG risk f.)Fofile or market benot:lmark , or lo Gaf.)italize on f.)eFC.ei>+•od
relati~•e 'Jaluo Of.lf.)Ortunities lo imf.)ro•,e safely, liEjuidity, yield, or risk/retuFA f.)Fofile of tt:le
portfolio . Transastion information will be inolueled in the Monthly ln\<estment Report tl=lat
is submitloEI lo the City Co.moil. St:loulEI any in~•estment listed in sestien Q.Q e>EoeeEI a
f.)ersentage of f.)Ortfolio limitation Elue to an insielent sust:I as flustualion in f.)Ortfolio size ,
lhe attested sesurities may be held to mawrity lo a•.ioiel losses . If it besomes nesessary
to sell an in'+'estmenl i:irior lo maturity (either at a f.)FOfit or loss) Elue lo une>Ef.)esteEI sash
flow needs , the Direstor of FinansefTreasurer shall first obtain af.)f.)ro>o<al for the transastion
from the City Manager. I.__ _____________________ __
1Q4 .0 Collateralization:
Unde r prov isions of the Ca li fornia Governmen t Code , Ca lifornia banks and savings and
loan associations are required to secure the City 's depos its by pledg ing government
securities with a value of 110 % of pr incipal and accrued interest. Ca li fornia law also
allows financ ial institutions to secure City depos its by pledg ing first trust deed mortgage
notes having a va l ue of 150% of the City 's total depos its . Co ll ateral will always be held
by an indepe ndent th ird party . The ma rket value of securit ies that underlay a repurchase
agreement sha ll be va lued at 102% or greater of the funds borrowed aga i nst those
securities and the va lue sha ll be adjusted no less than quarterly . Since the market value
12
Comme nted (CMS): Moved to sect ion on Risk
Maoagement aod Oivers ific atioo I
16
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
of the underlying securities is subject to daily market fluctuations, the investments in
repurchase agreements shall be in compliance if the value of the underlying securities is
brought back up to 102% no later than the next business day . The Director of
Finance/Treasurer , at his or her discretion , may waive the collateral requirement for
deposits that are fully insured up to $250,000 by the Federal Deposit Insurance
Corporation . The right of collateral substitution is granted.
112.0 Safekeeping and Custody:
All City investments shall identify the City of Palm Sp rings as the registered owner, and
all interest and principal payments and withdrawals shall indicate the City of Palm Springs
as the payee. All securities shall be safe kept with the City itself or with a
qualified financial institution, contracted by the City as a third party. All agreements and
statements will be subject to review annually by external auditors in conjunction with their
audit. In the event that the City has a financial institution hold the securities , a separate
custodial agreement shall be required . All securities shall be acquired by the safekeeping
instituti on on a "Delivery-Vs-Payment" (DVP) basis .
12.0 Risk Management and Diversification
Mitigating Credit Risk in the Portfolio
Credit risk is the risk that a security or a portfolio wi ll lose some or all its va lue due to a
real or pe rceived change in the ability of the issuer to repay its debt. The City will
mitigate credit risk by adopting the following strategies :
• The diversification requ irements included in the "Authorized Investments ' section
of th is pol icy are designed to mitigate credit risk in the portfol io .
• No more than 5% of the total portfolio may be depos ited with or invested in
securities issued by any single issuer unless otherwise specif ied in this policy.
• The City may elect to sell a security pr ior to its maturity and record a cap ital gain
or loss in order to manage the qual ity, liqu idity or yield of the portfol io in response
to ma rket conditions or City 's risk preferences.
• If If a security owned by the City is downgraded to a level below the requ irements
of this policy, making the security inelig ible fo r additiona l purchases. the Director
of Finance/Treasurer w ill use d iscretion in dete rmining whether to sell or hold the
security based on its current matur ity. the economic outlook for the issuer, and
other relevant factors . If a decision is made to retain a downgraded security in
the portfolio. its presence in the portfolio will be monitored and reported monthly
to the City Council .
13
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
If a security is downgraded by any NRSRO (Moody's, S&P or Fitch) below the
rating category of "BBB", it must be sold and removed from the City 's Portfolio
unless the City Council approves the Director of Finance/Treasurer's
recommendation that the security should be retained . Director of
Finance/Treasurer will mon itor and report status of such security to City Council
on each quarterly report prepared pursuant to Section 18.0
Mitigating Market Risk in the Portfolio
Market risk is the risk that the portfo lio va lue wi ll fluctuate due to changes in the general
level of interest rates . The C ity recogn izes that. over t i me, longer-term portfolios have
the potential to ach ieve higher returns. On the other hand. longer-term portfol ios have
higher volatility of return . The City will mitigate market risk by provid ing adequate
liquid ity for short-term cash needs , and by mak ing longer-term investments only with
funds that are not needed for current cash flow purposes .
The City further recognizes that certain types of securities , inc lud ing variable rate
securit ies, securities with principal paydowns prior to maturity , and securities with
embedded options , w ill affect the market risk profi le of the portfoli o d ifferently in different
inte rest rate environments . The City , therefore, adopts the following strategies to control
and mitigate its exposure to ma rket risk :
• The City will maintain a minimum of six months of budgeted operating
expenditures in short term investments to provide suffic ient liqu id ity for
expected disbursements .
• The maximum stated final maturity of individual securities i n the portfo l io
wi ll be five (5) years, except as otherwise stated in this policy .
• The duration of the portfolio will generally be approximately equal to the
duration (typically, p lus or minus 20%} of a Market Benchmark, an index
selected by the City based on the City 's investment obiectives . constraints
and risk tolerances .
13.0 Dii.ieF6ifiGali8Ri
The City"s in•1estment 13ertfolio w ill be diveFSified to a¥oid inQJrring 1:1nreasonable or
a'>•oidable risks associated w ith concentrating in•.•estments in specific sec1:1rity tyi;,es ,
marurit)' segment , or in indi11id1:1a l financia l instill:ltions . \i\lith the mmei;,tion of U.S .
Treasl:lF)' sec1:1rilies and au!horii!ed 1300Is , no mo~ tha n 50% of the tota l investA1ent
portfolio will be invested in a single security tyi;,e or with a single financial instil1:11ion . In
addition , no more than 10% of the in1,•estment 13ortfol io shall ee in sec1:1rities of any one
14
18
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
issuer mmept for U.S . Treasuries anEI U .S . Go¥ernment Agency iss1:1es .
C . Credit risk , defined as the risk of loss d1:1e lo fail1:1re of the ins1:1rer of a sec1:1rity , shall
be m it igated by in •,estin§ in those sec1:1 rit ies with an "A" or abo1.•e raling and
appro'led in the ln'leslment Policy and by d i¥ersifyin§ the in'lestment peftfol io so
that the fail1:1re of any one iss1:1er wo1:1ld not 1:1nd1:1ly harm the City 's cash flow.
9,-A . Market risk , dof.inod as the Fisk of market val1:10 fl1:1ot1:1ations d1:1e to O'lerall
changes in the general lei;ol of interest rates , shall ee mitigated , when possible , ey
stwct1:1rin§ the pol'tfolio so tl=lat sec1:1rities maturo at the same time !Rat major casR
01:1tflmvs oos1:1r , th1:1s eliminating !Re need to sell sesurities prior to their mal1:1r ity .
It is exp lisitly roco§n izoEl , howo•1or , that in a di'>•ersif.iod portfolio , occasional
measured losses are ine,;itaele anEl must ee consiElered within tRe context of
o•,erall investment raturn . TRe City 's in¥Ostment portfolio will remain sufficiently
liqu iEl to enaelo tl:le Cily lo meet all operating req1:1irnments wRicl:l m ight be
reasonably anticipated .
1~.0 Maximum Maturities:
To the extent possible, the City will attempt to match its investments with anticipated cash
flow requirements . Unless matched to a specific cash flow, the City will not directly invest
in securities maturing more than five (5) years from the date of purchase, unless, the City
Council has granted express authority to make that investment either specifically, or as a
part of an investment program approved by the City Council. lrhe wei§l=lteEl a~·erage
-• •• " ,, '" ~~r ·' 1i ndividual
•i ----I '""" I ·1
maturities are subject to the limitations described in Section 9.0.
1~.0 Internal Control:
The Director of FinancefTreasurer shall establish a system of internal controls designed
to prevent loss of public funds due to fraud , employee error, and misrepresentation by
third parties, or unanticipated market changes . No investment personnel may engage in
an investment transaction except as provided for under the terms of this Investment Policy
and the procedure established by the Director of FinancefTreasurer.
The external auditors shall annually review the investments with respect to the Investment
Policy. This review will provide internal control by assuring compliance with policies and
procedures for the investments that are selected for testing . Additionally, account
reconciliation and verification of general ledger balances relating to the purchasing or
maturing of investments and allocation of investments to fund balances shall be
performed by the Finance Department and approved by the Director of
Finance/Treasurer.
To provide further protection of City funds , wiring of any City funds is prohibited without
15
Commented [CM6): Removed WAM limitation to be In J
line with best practices
19
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
the authorization of one of the following designated City staff:
1. Director of FinancefTreasurer
2. Assistant Director of Finance
3. Assistant City Manager
4. City Manager
1§6.0 Performance Standards:
This Investment Policy shall be reviewed at least annually by the Director of
FinancefTreasurer to ensure its consistency with the overall objective of preservation of
principal , liquidity , and return , and its relevance to current law and financial and economic
trends. All financial assets of all other funds shall be administered in accordance with the
provisions of this Investment Policy.
1§6.1 Market Yield (Benchmark):
The investment portfolio shall be managed to attain a market-average rate of return
throughout budgetary and economic cycles , taking into account the City 's investment risk
constraints and cash flow . Investment return becomes a consideration only after the
basic requirements of investment safety and liquidity have been met. The Finance
DirectorfTreasurer shall establish an appropriate benchmark or benchmarks, as
appropriate , for investment parameters that reflect the types and maturities of
investments allowed under this policy . While the City will not make investments for the
purpose of trading or speculation as the dominant criterion , the Director of
FinancefTreasurer shall seek to enhance total portfolio return by means of ongoing
portfolio and cash management. The prohibition of highly speculative investments
precludes pursuit of gain or profit through unusual risk and precludes investments
primarily directed at gains or profits from conjectural fluctuations in market prices . The
Director of Finance/Treasurer will not directly pursue any investments that are leveraged
or deemed derivative in nature . However, as long as the original investments can be
justified by their ordinary earning power, trading in response to changes in market value
can be used as part of on-going portfolio management.
1§1.0 Oversight Committee:
A committee comprised of one Council member appointed by Council , the City Manager
and the Director of FinancefTreasurer, shall provide oversight of the City's investments .
The Committee shall meet quarterly to review the City's investment activity .
1!8.0 Reporting:
The Director of Finance/Treasurer shall submit a monthly investment report to the City
16
20
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
Council following the end of each month . This report will include the following elements :
Type of investment
• Institutional Issuer
Purchase Date
Date of maturity
• Amount of deposit or cost of the investment
• Face value of the investment
• Current market value of securities and source of valuation
• List of transactions occurring during the reporting period
• Rate of interest
• Percentage of Portfolio by Investment Type and by Maturity
• Days to Maturity for all Investments
• Performance of the portfolio relative to benchmark(s), as appropriate
• Comparative report on Quarterly Investment Balances and Yields
• Statement relating the report to its compliance with the Statement of Investment
Policy or the manner in which the portfolio is not in compliance
• Statement on availability of funds to meet the next six month 's obligations
This monthly investment report shall be an information item for the City Council. A
commentary on capital markets and economic conditions may be included with the report
but is not requ ired . The Director of Finance/Treasurer shall include in the monthly reports
for September, December, March and June a calculation of interest income for the quarter
and the comparison of the portfolio yield to the benchmark described in Section 16 .1.
1!!9.0 Investment Policy Adoption:
This Investment Policy shall remain in full force and effect until such time as the City
Council amends this policy . The City Manager w ill submit the Investment Policy to the
City Council for review and adoption on an annual basis.
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21
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
GLOSSARY
AGENCIES: Federal agency securities .
ASKED: The price at which securities are offered . (The price at which a firm will sell a
security to an investor.)
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or
leases or by pools of revolving lines of credit.
BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust
company. The accepting institution guarantees payment of the bill, as well as the issuer.
The drafts are drawn on a bank by an exporter or importer to obtain funds to pay for
specific merchandise. An acceptance is a high-grade negotiable instrument.
BASIS POINT: One one-hundredth of a percent (i .e ., 0 .01 %)
BID: The price offered by a buyer of securities . (When you are selling securities, you
ask for a bid .)
BROKER: A broker brings buyers and sellers together for a commission . He does not
take a position.
CERT IF IC A TE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by
a certificate . Large-denomination CDs are typically negotiable .
COLLATERAL: Securities , evidence of deposit or other property, which a borrower
pledges to secure repayment of a loan . Also refers to securities pledged by a bank to
secure deposits of public monies .
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that
redistribute the cash flows of mortgage securit ies (and whole loans) to create secu ri t ies
that have different levels of prepayment risk, as compared to the underlying mortgage
securities.
COMMERCIAL PAPER: Short term unsecured promissory note issued by a corporation
to raise working capital. These negotiable instruments are purchased at a discount to par
value or at par value with interest bearing . Commercial paper is issued by corporations
such as General Motors Acceptance Corporation, IBM, Bank of America , etc .
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual
financial report for the City . ft includes combined statements and basic financial
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22
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
statements for each individual fund and account group prepared in conformity with
Generally Accepted Accounting Principles (GAAP).
COUPON: a) The annual rate of interest that a bond 's issuer promises to pay the
bondholder on the bond 's face value . b) A certificate attached to a bond evidencing
interest due on a payment date.
DEALER: A dealer, as opposed to a broker, acts as a principa l in all transactions, buying
and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities :
delivery versus payment and delivery versus receipt. Delivery versus payment is delivery
of securities with an exchange of money for the securities . Delivery versus receipt is
delivery of securities with an exchange of a signed receipt for the securities .
DISCOUNT: The difference between the cost price of a security and its maturity when
quoted at lower than face value. A security sell ing below original offering price shortly
after sale also is considered to be at a discount.
DISCOUNT SECUR.ITIES: Non-interest bearing money market instruments that are
issued at a discount and redeemed at maturity for full face value (e.g ., U.S . Treasury
Bills).
DIVERSIFICATION: Div iding investment funds among a variety of securities offering
independent returns.
DURATION: A measure of the sensitivity of the price (value of principal) of a fixed-income
investment to a change in interest rates over a period of time . Duration is expressed by
a number of years. Stagnant or falling interest rates may result in the duration of an
investment being shorter than the stated maturity date .
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply
credit to various dasses of institutions (e.g ., S&Ls , small business firms , students,
farmers, farm cooperatives, and exporters).
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A Federal agency that
insures bank deposits , currently up to $250,000 per deposit
FEDERAL FUNDS RATE: The rate of interest at which Federal funds are traded. This
rate is currently pegged by the Federal Reserve though open-market operations .
FEDERAL HOME LOAN BANKS (FHLB): The institutions that regulate and lend to
savings and loan associations . The Federal Home Loan Banks play a role analogous to
19
23
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
that played by the Federal Reserve Banks vis-a-vis member commercial banks.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Created to promote
the development of a nationwide secondary market in mortgages . It does this by
purchasing residential mortgages from financial institutions insured by an agency of the
federal government and selling its interest in them through mortgage backed securities.
The interest and principal payments from the mortgages pass through to the investors
either monthly, semiannually or annually .
FEDERAL LAND BANK (FLB): Long-term mortgage credit provided to farmers by
Federal Land Banks. These bonds are issued at irregular times for various maturities
ranging from a few months to ten years .
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA , like GNMA was
chartered under the Federal National Mortgage Association Act in 1938. FNMA is a
Federal corporation working under the auspices of the Department of Housing and Urban
Development (HUD). It is the largest single provider of residential mortgage funds in the
United States . Fannie Mae, as the corporation is called , is a private stockholder-owned
corporation . The corporation 's purchases include a variety of adjustable mortgages and
second loans , in addition to fixed-rate mortgages. FNMA's securities are highly liquid and
are widely accepted . FNMA assumes and guarantees that all security holders will receive
timely payment of principal and interest.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the
Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents . The
President of the New York Federal Reserve Bank is a permanent member, while the other
presidents serve on a rotating basis. The committee periodically meets to set Federal
Reserve guidelines regarding purchases and sales of Government Securities in the open
market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by
Congress and consisting of a seven-member Board of Governors in Washington , D .C .;
12 regional banks and about 5 ,700 commercial banks are members of the system .
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA OR GINNIEMAE):
Securities influencing the volume of bank credit guaranteed by GNMA and issued by
mortgage bankers , commercial banks , savings and loan associations and other
institutions . Security holder is protected by full faith and credit of the U.S. Government.
Ginnie Mae securities are backed by the FHA or VA mortgages. The term "pass-through "
is often used to describe Ginnie Mae securities .
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash
20
24
CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
without a substantial loss of value . In the money market , a security is said to be liquid if
the spread between bid and asked prices is narrow and reasonable size can be done at
those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from
political subdivisions that are placed in the custody of the State Treasurer for investment
and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumable
be purchased or sold .
MARKET REPURCHASE AGREEMENT: A written contract covering all future
transactions between the parties to repurchase-reverse agreements that establish each
party's rights in the transactions. A master agreement will often specify , among other
things , the right of the buyer-lender to liquidate the underlying securities in the event of
default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes
due and payable .
MORTGAGE PASS-THROUGH SECURITIES . A securitized participation in the interest
and principal cash flows from a specified pool of mortgages. Principal and interest
payments made on the mortgages are passed through to the holder of the security
NEGOTIABLE CERTIFICATES OF DEPOSIT: Unsecured obligations of the financial
institution , ban~ or savings and loan , bought at par value with the promise to pay face
value plus accrued interest at maturity. They are high-grade negotiable instruments,
paying a higher interest rate than regular certificates of deposit.
OFFER: The price asked by a seller of securities . (When you are buying securities, you
ask for an offer).
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other
securities in the open market by the New York Federal Reserve Bank as directed by the
FOMC in order to influence the volume of money and credit in the economy . Purchases
inject reserves into the bank system and stimulate growth of money and credit: Sales
have the opposite effect. Open market operations are the Federal Reserve's most
important and most flexible monetary Policy tool.
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit daily reports
of market activity and positions and monthly financial statements to the Federal Reserve
Bank of New York and are subject to its informal oversight. Primary dealers include
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
Securities and Exchange Commission (SEC) registered securities broker/dealers, banks
and a few unregulated firms .
PRUDENT PERSON RULE: An investment standard. In some states , the law requires
that a fiduciary , such as a trustee. may invest money only in a list of securities selected
by the custody state-the so -called • legal lisr. In other states . the trustee may invest in
a security if it is one that would be bought by a prudent person of discretion and
intelligence who is seeking a reasonable income and preservation of capital.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or
its current market price .
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a fixed date . The
security "buyer" in effect lends the ·seller' money for the period of the agreement . and the
terms of the agreement are structured to compensate him for this . Dealers use RP
extensively to finance their position . Exception : when the Fed is said to be do ing RP , it
is lending money that is , increasing bank reserves .
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities
and valuables of all types and descriptions are held in the bank's vaults for protection .
SUPRANATIONAL$: Development banks that share the same goal of providing an
improved standard of living in their member countries , but each having different
mandates . There are three banks (Supranationals) in which California local agencies can
invest their debt obligations ; the International Bank for Reconstruction and Development
(IBRD). International Finance Corporation (IFC) and Inter-American Development Bank.
STUDENT LOAN ASSOCIATION NOTES (SLMA or SALLIE MAE): A U.S. Corporation
and instrumentality of the U.S . Government. Through its borrowings, funds are targeted
for loans to students in higher education institutions. SLMA securities are highly liquid
and are widely accepted .
SMALL BUSINESS ADMINISTRATION (SBA): The portion of these securities which
are guaranteed by the Federal government to provide financial assistance through direct
loans and loan guarantees to small businesses . Cash flows from these instruments may
not be in equal installments because of prepayments .
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues
following the initial distribution .
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect
investors in securities transactions by administering securities legislation .
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CITY OF PALM SPRINGS
INVESTMENT POLICY AND GUIDELINES
SEC RULE 15C3-1: See "Uniform Net Capital Rule ".
SUPRANATIONAL. A Supranational is a multi-national organization whereby member
States transcend national boundaries or interests to share in the decision making to
promote econom ic development in the member countries .
TENNESSEE VALLEY AUTHORITIES (TVA): A U.S . Corporation created in the 1930s
to electrify the Tennessee Valley area ; currently a major utility headquartered in Knoxville ,
Tennessee. TVA securities are highly liquid and are widely accepted.
TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury
to finance the national debt. Most bills are issued to mature in three months , six months ,
or one year.
TREASURY BOND: Long-term U.S. Treasury securities having initial maturities of more
than10 years.
TREASURY NOTES: Intermediate-term coupon bearing U.S. Treasury having initial
maturities of one year to ten years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commiss ion requirement
that member firms as well as nonmember brokerfdealers in securities maintain a
maximum ratio of indebtedness to liquid cap ital of 15 to 1; also called net capital rule and
net capital ratio . Indebtedness covers a ll money owed to a firm , including marg in loans
and commitments to purchase securities , one reason new public issues are spread
among members of underwriting synd icates . Liquid capital includes cash and assets
easily converted into cash .
YIELD: The rate of annual income ret urn on an investment, expressed as a percentage .
(a) Income Y ield is obtained by dividing the current dollar income by the current market
price for the security . (b) Net Yield or Yield to Maturity is the current income yield minus
any premium above par or plus any d iscount from par in purchase price , with the
adjustment spread over the period from the date of purchase to the date of maturity of the
bond .
23
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Table of Contents
Section 1 Chandler Asset Management Information
Section 2 Investment Policy and Reporting
Section 3 Corporate Issuer Discussion
Section 4 Disclosures
Chandler Ass<=>t Management I I 29
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Engagement Team for the City of Palm Springs Q\\
City Council City of Palm Springs Finance Staff
Your Assigned Team
Supported by 27 Additional Professionals:
Investment Management, Compliance, Operations, Client Service and Administration
Chandler As5et Management I 3 31
We Work with You on All Aspects of Your Program
Chandler is committed to
fulfilling your scope of
services so that you can
continue your mission as
"an inclusive world-
class city dedicated to
providing excellent and
responsive public services
to enhance the quality of
life for current and future
generations."
• ! . . . I I
lnvestme • I
Ch:mdler Asset Man.:igement I 4 32
Lasting Partners hi ps with Your Neighbors and Peers Q\\
Chandler's strong client retention rate is a testament to our commitment to our clients.
Inland & Coachella Area Clients
City of Chino Hills
City of Corona
City of Desert Hot Springs
City of Indio
City of Menifee
City of Moreno Valley
City of Murrietta
City of Perris
City of Riverside
City of San Jacinto
Coachella Valley Water District
Eastern Municipal Water District
Elsinore Valley Municipal Water District
Rancho California Water District
San Bernardino Municipal Water Department
Western Municipal Water District
Los Angeles Area Clients
Alameda Corridor Trans. Authority
City of Agoura Hills
City of Bell
City of Camarillo
City of El Monte
City of Gardena
City of La Mirada
City of Long Beach
City of Pico Rivera
City of Pomona
Los Angeles County Metro. Trans. Authority
Three Valleys Municipal Water District
Upper San Gabriel Mun. Water District
Walnut Valley Water District
West San Gabriel Schools JPA
Whittier Area Schools Insurance Authority
Orange County Clients
City of Brea
California Insurance Pool Authority
City of Buena Park
City of Costa Mesa
City of Fountain Valley
City of La Habra
City of Mission Viejo
City of Newport Beach
City of San Clemente
City of San Juan Capistrano
City of Westminster
East Orange County Water District
Moulton Niguel Water District
Orange County Sanitation District
Orange County Transportation Authority
Transportation Corridor Agencies
A listing of the firm's clients in the State of California's Inland & Coachella area, Los Angeles area and Orange County, shown in alphabetical order. As of
September 30, 2020. This list only includes clients that hove given permission to be listed. It is not known whether the clients listed approve or disapprove of
Chandler Asset Management and the advisory services provided. Includes discretionary and non-discretionary relationships.
Chandler Asset Management I S 33
•
•
City's Investment Program
Chandler will help the City determine an appropriate amount of
risk.
We would like to explore:
• Increased diversification to issuers and sectors
• Utilizing a duration target
• Implementing a dynamic maturity structure
Sector Allocation
LAIF 26.6% 60.0%
Pool 50.0%
Treasury 40.0%
Agency 30.0%
Cash 20.0%
Corporate
10.0%
co
0 .0%
0 .0% 10.0% 20.0% 30.0% 0 -0.5 0.5 -1
Source: City of Polm Springs' Treasurers' Monthly Report os of December 31, 2020.
Characteristics
Total Market Value: $236,837,343
Average Maturity: 0.72 years
Portfolio os of 9/30/2020
Maturity Distribution
•Treasury
•Agency
• Corporate
•co
• LAIF
•Poo l
Money Market
1-1.5 1.5 -2 2 -3 3 -4 4 -5
C"1aridl<3r A,;set Management I 6 34
Optimal Portfolio Structure
Liquidity Portfolio
• Matching maturities to known expenditures.
A combination of:
• Local Agency Investment Fund (LAIF)
• High-quality short-term securities
permitted by CA Government Code
and the Investment Policy
• Target a higher duration to enhance the
potential to increase earnings.
• Implement a realized or total r eturn
objective
• Invest in high -quality securities
allowed by CA Government Code and
the Investment Policy
Chand IP Asset Management I 7 35
Chandler's Investment Strategies as of December 31, 2020 Q\\
limited Maturity Short Term Bond
Average Final Maturity
Average Duration
Average Market Yield
Average Quality (S&P)
Average Coupon
1.91 years
1 .79 years
0.20%
AA+
1.67%
Average Final Maturity
Average Duration
Average Market Yield
Average Quality (S&P)
Average Coupon
2.70 years
2.49 years
0.31%
AA
2.01%
Maturity Distribution
68.0%
Maturity Distribution
80.0%
60.0%
40.0%
20.0%
0.0%
0-1 1-3
60.0%
40.0%
9.1% 20.0%
0 .0%
3-5
42.5% 40.0%
0 .8%
0-1 1-3 3-5 5-7
Sector Allocation
US Treasury ABS Cash Sector Allocation
23.7% 1.3%
Supranational
2 .7%
Negotiable CD
2.4%
US Corporate
15.9%
CMO
1 .1%
Other•
0 .7%
Agency
48.7%
•other includes Commercial Poper,
Municipal Bonds, and MBS.
Supranational
3.6%
US Corporate
19.8%
Based on Chandler's limited Maturity and Short Term Bond composite characteristics as of 12/31/2020. Credit Quality equivalent of composite/overage of S&P,
Moody's and Fitch ratings; "A" category includes "A-1" rated money market securities . The compos ite characterist ic information presented above is supplemental
information pursuant to GIPS •. There is no guarantee that investment in any of these styles will result in characteristics similar to those that appear in this
presentation due to changes in economic conditions and other market factors . Post performance and compos ite characteristics ore not indicative of future results.
Please see the GIPS Compos ite Report at the end of this presentation for complete details .
Other•
1.7%
CMO
3.1%
ABS
4.9%
•other includes Cosh, Negotiable CD,
MBS, ond Mun icipal Bonds
Ch ndl r Asset Mc1n ~g rnent 1 8 36
Benchmark Comparison Q\\
.s:: ....
~
0 ...
$1.25
$1.20
$1.15
-LAIF
-1-3 Yr Treasury Benchmark
-1-5 Yr Government Benchmark
l!> $1.10
$1.05
$1.00
Va lue on 12/31/2020 of $200 million invested 12/31/2010
LAIF
1-3 Yr Treasury Benchmark
1-5 Yr Gove rn men t Benchma rk
12/31/2020
$217,712,582
$227,553,726
$238,62 1,086
Annuali zed Return
0.85%
1 .30%
1.78%
Source : LAIF ond ICE BAML Indi ces os of 12/31/2020. LAIF returns include on administrative fee charged to investors by the California Store Treasurer . Index returns assume reinvestment of o/1 distributions. Historical
performance results for investment indexes generally do not reflect the deduction of transaction and/or custodial charges or the deduction of on investment management fee, the incurrence of wh ich would hove the
effect of decreasing historical performance results . It is not possible to invest directly in an index. Past performance is not indicative of future results . Please see disclosures ot the end of this presentation.
( 1 1,"' /I ., r M r,agement I 9 37
Strategy Considerations
Limited Maturity Strategy
• Buy/Hold Strategy • Requires periodic rebalancing of
portfolio, i.e. buys and sells to maintain
• Do not need to sell prior to longer duration
maturity to maintain target
duration • Slightly Higher Volatility
• Low Volatility • Recommended when liquidity needs are
satisfied by LAIF and or a LGIP
• lmbedded Liquidity if needed
• Longer maturities imbed less liquidity, but
• Maturities between zero and five years have promoted higher historical returns
• Five-year Maximum Maturity
C1,andler Asset Man ge,nent I 10 38
Historical Growth
Investment Style
LAIF
Chandler Limited Maturity
Chandler Short Term Bond
Chandler Investment Styles
10-Year Net of Fee Hypothetical Performance*
December 2010 -December 2020
Portfolio
Duration
0.45
1.79
2.49
Anhualized _.Tofal ,Returri
10:-Vear>Pe"riod .
(Ne·t ;of6; bpsfee)
0.85% $217. 7 million
1.51% $232.2 million
1.95% $242.6 million
Q\\
Net performance for Chandler investment styles based on sample annual fee {0 .06 of 1% calculated for a $200 million portfolio), relotlve to LAIF. LAIF returns include an administrative fee charged to
investors by the California State Treasurer. LAIF duration estimated based on overage maturity in days as of 12/31/2020, divided by 365. Performance shown is hypothetical for a $200 million portfolio
and not based on on actual client's account. Performance for Chandler's Umited Maturity and Short Term Bond has been calculated using historical composite performance. All investment strategies
have the potential for profit or loss. Economic factors, market conditions or changes in investment strategies may materially olter the performance and resvlts of a portfolio. Past performance is not
Indicative of future results. Please see GIPS Composite Reports and disclosures at the end of this presentation for further details. For one on one presentation only.
Chand! r Ass t Management I 11 39
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lnvestible Universe Per Current Investment Policy and Code
Expanding the City's Investment Policy to Meet the CA Govt State Code -Will Increase
Diversification of the City's Investment Portfolio
City of Palm Springs Investment Portfolio
$200 Million
Permitted Security Types:
Treasury, Agency, Corporate
Permitted:
Not Permitted:
• Supranationals
• Asset and Mortgage-
Backed Securities
• SB 998
• Treasuries, Agencies
• Medium Term Notes
• No more than 2% per issuer
Source: City of PolmSprings Investment Policy C'landkr Asset Manc.1gemen· I 13 41
Investment Policy Recommendations a,,
Investment Policy Review: It is about more than just the investments
We believe the recommendations listed below take into consideration the desire to retain the predominant language of a well
written policy yet address best practices for the upcoming year. As such, our recommended changes are as follows:
• Section 9: Cash and Investments:
o Commercial Paper: CAM recommends adjusting the ma x percentage of portfolio to 40% consistent with the passing of SB
998
o Medium-Term Corporate Notes: CAM recommends moving downgrade language to Section 12: Risk Management and
Diversification
o Pass-Through Securities: CAM recommends adding Pass-Through Securities (Asset Backed, Mortgage Backed and
Collateralized Mortgage Obligations) as permittable investments with maximum maturity of 5 years, maximum percentage
of portfolio of 20% and maximum exposure of 5% per issuer
o Supranational Securities: CAM recommends adding Supranational Securities as a permittable investment with maximum
maturity of 5 years, maximum percentage of portfolio of 30% and maximum exposure of 10% per issuer
• Section 9.3: Prohibited Investments
o CAM recommends updating language to be consistent with the passing of SB 998 for the approval of investing in negative
yield investments issued or back by the US government.
• Section 10: Portfolio Adjustments
o CAM recommends moving the language of this section to Section 12: Risk Management and Diversification, to be in line
with best practice
• Section 12: Risk Management and Diversification
o CAM recommends merging Section 10 Portfolio Adjustments and Section 13 Diversification into new Section 12 Risk
Management and Diversification. This recommendation is in line with standard best practices defining the m itigation of
risk in the portfolio, issuer limitation, downgrade language and portfolio duration in line with a market benchmark.
• Section 14 Maximum Maturities:
o CAM recommends removal of WAM limitation to be in line with standard best practices .
• Glossary
o CAM recommends the inclusion of new terms to the Glossary
Chandler Asset f\/lanagernent I 14 42
Changes to CA code for 2021 -SB 998 Moorlach
• For Local Agencies with more than $100,000,000 of investable assets under management, SB
998 increases the allowable limit for investments in commercial paper from 25 % to 40%*;
• Local Agencies (other than a county or a city & county) are limited to investi ng no more than
10% of its combined investments in the commercial paper and the medium-term notes of any
single issuer;
• Federally recognized California Indian Tribes may invest in joint powers investment pools; and
• Local Agencies are authorized to invest in securiti es issued by, or backed by, the United States
Government that could result in zero or negative interest accrual if held to maturity.*
*The authorization to invest in commercial paper up to 40% of investab le assets and the ability to invest in zero or negative interest investments will expire on January 1st,
2026.
C.handlt?r Asset Management I 15 43
Socially Respons ib le Inve sting (SRI} Q\\
• Chandler has a long history of implementing customized SRI solutions for our clients
Chandler works closely with clients to identify the SRI issues they are looking to address on a case-
by-case basis
Global Industry Classification Standards (GICS) are often utilized to create an SRI program that can
be accurately tracked within Chandler's automated compliance system
Chandler also ha s the ability to exclude specific securities and issuers as part of an SRI program
• Chandler incorporates Environmental, Social, and Governance (ESG) factors into our fundamental credit
research process
In Chandler's view there are ESG factors that influence the underlying credit quality and longer-term
outlook of a corporation
Integrating ESG factors in our credit analysis process is consistent with the underlying tenets of
California Government Code -safety, liquidity, and return
ESG factors evolve over time. The Chandler credit team is charged with ensuring the current and
evolving ESG factors are consistent with the current relative value of a given security compared to
the peer group
•For our local agency clients, from both an SRI and ESG perspective, we do not purchase securities of
companies that receive more than 50% of their revenue from the sale or manufacture of tobacco, alcohol, or
firearms
Chand er Asset Mar>agement I 16 44
Implementing ESG/SRI Investing
• Chandler's approved ESG issuers are those that:
Support ESG objectives;
Demonstrate superior safety characteristics; and,
Provide competitive relative value in the marketplace.
• Resources used as initial filters to identify issuers that support ESG objectives
Global Industry Classification Standard (GICS};
Calvert Social Index;
350 .org (a website dedicated to ESG investing and in particular, fossil fuels);
Bloomberg
Chandler Asset Management I 17 45
Bloomberg ESG Tool
Source : Bloomberg
Chand! r A et Managenierit I 18 46
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47
Corporate Issuer List for Consideration
Calvert U.S. Large Cap FTSE USA All Cap FTSE 4Good US MSCIUSA
Fund Index Core Responsible Choice Total Select Index Extended ESG
Index Return Index Focus Index -Calvert U.S. Large Cap Vanguard FTSE iShares ESG Aware Vanguard ESG US Company Name Industry Ticker Ii + Core Responsible Stock ETF (ESGV) Social Index Fund MSCI USAETF
Index Fund (CISIX) (VFTAX) (ESGU)
Apple Inc Technology AAPL Yes Yes Yes Yes Yes
Amazon.com Inc Communications AMZN Yes Yes Yes Yes Yes
Air Products and Chemicals Inc Basic Materials APO Yes Yes Yes Yes Yes
Bank of America Corp Financial BAC Yes Yes Yes Yes Yes
Bank of New York Mellon Corp/T Financial BK Yes Yes Yes Yes Yes
BlackRock Inc Financial BLK Yes Yes Yes Yes Yes
Caterpillar Inc Industrial CAT Yes Yes Yes Yes Yes
Colgate-Palmolive Co Consumer, Non-cyclical CL Yes Yes Yes Yes Yes
CME Group Inc Financial CME Yes Yes Yes Yes Yes
Costco Wholesale Corp Consumer, Cyclical COST Yes Yes Yes Yes Yes
salesforce.com Inc Technology CRM Yes Yes Yes Yes Yes
Cisco Systems Inc/Delaware Communications csco Yes Yes Yes Yes Yes
Deere &Co Industrial DE Yes Yes Yes Yes Yes
Alphabet Inc Communications GOOGL Yes Yes Yes Yes Yes
Home Depot Inc/The Consumer, Cyclical HD Yes Yes Yes Yes Yes
International Business Machine Technology IBM Yes Yes Yes Yes Yes
Intel Corp Technology INTC Yes Yes Yes Yes Yes
JPMorgan Chase & Co Financial JPM Yes Yes Yes Yes Yes
Kimberly-Clark Corp Consumer, Non-cyclical KMB Yes Yes Yes Yes Yes
Coca-Cola Co/The Consumer, Non-cyclical KO Yes Yes Yes Yes Yes
Eli Lilly and Co Consumer, Non-cyclical LLY Yes Yes Yes Yes Yes
Mastercard Inc Financial MA Yes Yes Yes Yes Yes
Merck & Co Inc Consumer, Non-cyclical MRK Yes Yes Yes Yes Yes
Morgan Stanley Financial MS Yes Yes Yes Yes Yes
Microsoft Corp Technology MSFT Yes Yes Yes Yes Yes
Northern Trust Corp Financial NTRS Yes Yes Yes Yes Yes
PACCAR Inc Consumer, Cyclical PCAR Yes Yes Yes Yes Yes
Please see the disclosures at the end of this presentation.
Chardler Asset rv1aragem nt I .zo 48
Corporate Issuer List for Consideration
Calvert U.S. Large Cap FTSE USA All Cap FTSE 4Good US MSCIUSA
Fund Index Core Responsible Choice Total Select Index Extended ESG
Index Return Index Focus Index
Calvert U.S. Large Cap Vanguard ESG US Vanguard FTSE !Shares ESG Aware
Company Name Industry Ticker + Core Responsible Stock ETF (ESGV) Social Index Fund MSCI USAETF
Index Fund (CISIX) (VFTAX} (ESGU)
PepsiCo Inc Consumer, Non-cyclical PEP Yes Yes Yes Yes Yes
pfizer Inc Consumer, Non-cyclical PFE Yes Yes Yes Yes Yes
Procter & Gamble Co/The Consumer, Non-cyclical PG Yes Yes Yes Yes Yes
Progressive Corp/The Financial PGR Yes Yes Yes Yes Yes
PNC Financial Services Group I Financial PNC Yes Yes Yes Yes Yes
Charles Schwab Corp/The Financial SCHW Yes Yes Yes Yes Yes
State Street Corp Financial STT Yes Yes Yes Yes Yes
Target Corp Consumer, Cyclical TGT Yes Yes Yes Yes Yes
United Parcel Service Inc Industrial UPS Yes Yes Yes Yes Yes
US Bancorp Financial USB Yes Yes Yes Yes Yes
Visa Inc Financial V Yes Yes Yes Yes Yes
Chubb Ltd Financial CB Yes No Yes Yes Yes
Chevron Corp Energy cvx Yes No No No Yes
Honeywell International Inc Industrial HON Yes No No No Yes
Johnson & Johnson Consumer, Non-cyclical JNJ Yes No No No Yes
Linde PLC Basic Materials LIN Yes No Yes Yes Yes
3M Co Industrial MMM Yes Yes No No Yes
QUALCOMM Inc Technology QCOM Yes No Yes Yes Yes
Walmart Inc Consumer, Cyclical WMT Yes Yes No No No
laok:OfiM.Qofu?a'J'' --·fJna nda f _ BMO Ves _ No No No No
e.tfkitUJi;fiait(ifw.avJM:: enanoa.l BRK Yes No No No No
Rov iif:aan}fjif ~Ra.cfi ; 1:1iian.aat RV Yes 1\10 No No No
t Qt.o n~iiinfitiioilr:.ai nWe, Fi nancia l TO Yes No No No No
Exxoitiifoti lt"C4Sro · _ -
Energy X8M Yes No No No Yes
Please see the disclosures at the end of this presentation .
Chandlt!r Asset Mariagem nt 21 49
50
Disclosures
The information herein is provided for informational purposes only and should not be constr ued as a recommendation of any security, strategy, or investment product, nor an offer or
solicitation for the purchase or sale of any financial inst rument . No investment decision should be made based solely on the information provided herein. All invest ments involve risk,
including loss of principal invested. The strategies referenced may not be su itable for all investors. Economic factors, mar ket conditions, and invest ment strategies will affect the
performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. The data contained in this presentation is the property of those
providers, which was obtained from sources believed to be reliable, but are su bject to change at any time at the provider's discretion. Unless otherwise noted, Ch andler is the source of
data contained in this presentation.
Any forecasts, forward-looking statement s and assumptions are inherently limited and should not be relied upon as an indicator of future results. Any opinions or views constitute
judgments made by the author at the date of this presentation and may become outdated or superseded at any time without notice. Any statements concerning financial market
trends are based on cu rrent market conditions, which will fluctuate. Past performance is no guarantee of future results. There is a possibility of loss on all investments and investor
principal is not guaranteed. Performance information provided should not be used in making investment decisi o ns.
Index returns assume reinvestment of all distributions. Historical performance results for investment indexes generally do not reflect the deduction of transacti on and/or custodial
charges or the deduction of an investment management f ee, t he incurrence of which would have the effect of decreasing histor ical performance results. It is not possible to invest
directly in an index.
Where listed, certain performance shown is hypothetical and does not represent actual trading in a cl ient's account. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE
CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. NO REPRESENTATION IS BEING MADE THAT ANY
ACCOUNT W ILL OR IS LIKELY TO ACH IEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE
RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOT HETICAL PERFORMANCE RESULTS IS
THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK AND DOES NOT TAKE INTO
ACCOUNT THAT MATERIAL AND MARKET FACTORS MAY HAVE IMPACTED THE ADVISER'S DECISION MAKING IF THE ADVISER WERE ACTUALLY MANAGING CLIENT'S MONEY. NO
HYPOTHETICAL TRAD ING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINA NCIA L RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR
ADHERE TO A PARTICULAR TRAD ING PROGRAM IN SP ITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE
NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADI NG PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR
IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. It should not be assumed that investors who
invest in Chandler Asset Management's Portfolios will be profitable or ach ieve the hypothetical performance results reflected or any corresponding index presented. Actual
performance of and holdings and investment implementation in Chandler Asset Management's client accounts can materially differ from that of the hypothetical models presented
herein and performance can be higher or lower than the results shown. Investors may have experienced investment results during the corresponding time periods that were materially
different from those portrayed. Back-tested performance does not represent actual performance and should not be interpreted as an indication of such performance. The opinions
referenced are as of the date of publication and are subject to change. Chandler Asset Management has discretion in the timing of trade execution and selection of securities traded
and utilized in any client account, which can and will materially differ from the hypothetical simulated performance based upon a variety of factors, including the adviser's discretion to
not follow any trading signa l generated and to determine the timing and implementation of a trade (which can include securities other than those listed).
Fixed income investments are subject to interest, credit and market risk. Inter est rate risk: the value of fixed income investments will decline as interest rates rise. Credit risk: the
possibility that the borrower may not be able t o repay interest and principal. Low rated bonds generally have to pay higher interest rates to attract investors willing to take on greater
risk. Market risk: the bond market in general could decline due to economic conditions, especially during periods of rising interest rates.
Chandler Asset Ma'1agernent I 23 51
Disclosures (continued)
LAIF
The California State Local Agency Investment Fund (LAIF) is an investment portfolio managed by the State Treasurer. All securities are purchased under the authority of Government
Code Section 16430 and 16480.4 and include securities issue d by entities of the US Government, including the US Treasury and Agencies, Corporate debt, Certificates of Deposit ,
Mortgage Backed Securities and certain loans to the State and state agencies. The average maturity of the Fund w ill be between 120 days and 18 months.
ICE BAML 1-3 Year US Treasury Index
The ICE BAML 1-3 Year US Treasury Index tracks the performance of US dollar denominated sovereign debt publicly issued by the US government in its domestic market. Qualifying
securities must have at least one year remaining term to final maturity and less than three years remaining term to final maturity, a fixed coupon schedu le and a mi nimum amount
outstanding of $1 bil lion. Qualifying securities must have at least 18 months to final maturity at the time of issuance. (Index: G1O2. Please visit www.mlindex.ml.com for more
information).
ICE BAML 1-5 Year US Treasury & Agency Index
The ICE BAML US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and nonsubordinated US agency debt issued in the US domestic market.
Qualifying securities must have an investment grade rating (based on an average of Moody's, S&P and Fitch). Qualifying securities must have at least one year remaining term to final
maturity and less than five years remaining term to final maturity, at least 18 months to maturity at t ime of issuance, a fixed coupon schedu le and a minimum amount outstanding of
$1 billion for sovereigns and $250 million for agencies. (Index: GVA0. Please visit www.mlindex.ml.com for more information).
Source ice Data Indices, LLC ("ICE"), used with permission. ICE permits the use of ICE Indices and related data on an "as is" basis; ICE, its affiliates and their respective third party
suppliers disclaim any and all warranties and representation, express and/or implied, including any warranties of merchantability or fitness for a particular purpose or use, including the
indices, index data and any data included in, related to, or derived therefrom. Neither ICE data, its affiliates or their respective third-party providers guarantee the quality, adequacy,
accuracy, timeliness or completeness of the indices or the index data or any component thereof, and the indices and index data and all components thereof are provided on an "as is"
basis and licensee's use is at licensee's own risk. ICE data, its affiliates and their respective third party do not sponsor, endorse, or recommend Chandler, or any of its products or
services.
Chanoler Asset Management I 24 52
GIPS® Compliant Verification Statement
.. ACA
""'1111111111 COMPLIANCE GROUP
PERFORMANCE SERVICES
Chandler Asset Management, Inc.
6225 Lusk Boulevard
San Diego, CA 92121
Verfflcatton Report
We have verified whether Chandler Asset Management, Inc. (the "Finnj has, for the periods from
July I, 1997 through March 31, 2020, established policies and procedures for complying with the Global
Investment Performance Standards (GIPS•) related to composite and pooled fund maintenance and the
calculation, presentation, and distribution of performance that are designed in compliance with the GIPS
standards, as well as whether these policies and procedures have been implemented on a firm-wide basis.
GIPS• is a registered trademarlc of CFA Institute. CFA Institute does not endorse or promote this
organization, nor does it warrant the accuracy or quality of the content contained herein .
The Firm's management is responsible for its claim of compliance with the GIPS standards and the design
and implementation of its policies and procedures. Our responsibilities are to be independent from the Firm
and to express an opinion based on our verification . We conducted this verification in accordance with the
required verification procedures of the GIPS standards, which includes testing performance on a sample
basis. We also conducted such other !X'ocedures as we considered necessary in the circumstances.
In our opinion, for the periods from July 1, 1997 through March 31 , 2020, the Firm 's policies and
procedures for complying with the GIPS standards related to composite and pooled fund maintenance, as
well as the calculation, presentation, and dis1ribution of performance, have been, in all material respects:
• Designed in compliance with the GIPS standards, and
• Implemented on a finn-wide basis.
This report does not relate to or provide assurance on any specific performance report of the Finn or on the
operational effectiveness of the Finn 's controls or policies and procedures for complying with the GIPS
standards.
Adviser Compliance Associates, LLC
ACA Performance Services Division
October 22, 2020
Chand!, r Asset Managemen I 25 53
GIPS® Composite Report: Limited Maturity
Annual Rates of Return 2010 through 2020
Chandler Asset Management claims compliance with the
Returns 3 Year Annualized Dispersion Assets Global Investment Performance Standards (GIPS") and has
Year Total Total Standard Deviation AssetWtd Number of Composite %of Firm Firm prepared and presented this report in compliance with
the GIPS standards.
End Gross Net Index Composite Index Std. Dev. Portfolios (MM) Assets (MM)
2010 2.96% 2.70% 2.35% n/a n/a 0.38% 8 201 3.50% 5,755 Chandler Asset Management has been independently
verified by ACA Performance Serv ices for the period of July
2011 1.88% 1.62% 1.55% 1.02% 1.02% 0.31% 9 222 3.74% 5,929 1, 1997 through Ma r ch 31, 2020. The verification report is
2012 1.16% 0.91% 0 .43% 0.78% 0.73% 0.06% 15 474 7 .37% 6,431 available upon request. A firm that claims compliance with
the GIPS standards must establish policies and procedures
2013 0.30% 0.05% 0 .36% 0.59% 0.50% 0 .08% 18 797 11.12% 7,165 for complying wi th all the applicable requirements of the
2014 0.87% 0.61% 0 .62% 0.54% 0.43% 0.09% 21 879 9.88% 8,894 GIPS standards. Verification provides assurance on
whether the firm 's policies and procedures rel ated to
2015 0.74% 0.49% 0.54% 0.63% 0 .56% 0.07% 27 1,328 11.31% 11,747 composite ma intenance, as well as the calculation,
2016 1.11% 0.86% 0 .88% 0.74% 0.76% 0 .06% 31 1,081 8.39% 12,882 presentation, and distribution of performance, have been
designed in compliance with the GI PS standards and have
2017 0.85% 0 .60% 0.43% 0 .71% 0.74% 0.08% 32 1,178 8.60% 13,698 been implemented on a firm-wide basis. Verification does
2018 1.69% 1.44% 1.59% 0.77% 0.85% 0 .03% 31 1,905 11.51% 16,551 not provide assurance on the accuracy of any specific
performance report.
2019 3.87% 3.61% 3.55% 0 .84% 0 .94% 0.08% 39 2,653 13.57% 19,552
2020 3.25% 3.00% 3.12% 0 .92% 1.21% 0.12% 39 2,713 12.21% 22,227
1. Chandler Asset Management is an in dependent Investment advi ser reg istered as such with the Secur ities and Exchange Commission under the Investment Adviser's Act of 1940. Registration with the SEC does not Imply a
certa in level of skill or training. Since 1988, Chandler Asset Management has provided fixed income investment management services to the publi c sector, as well as to foundations, endowments, individual s and
corporations . A complete li st and description of all of the firm's composites is available upon reque st.
2. The limited Maturity Composite is a compos ite of individually managed accounts with an average modified duration approximately equal to the modified duration of the ICE Bank of America Merrill Lynch 1-3 Year US
Treasury Index and a final stated maturi ty of in div idua l securit i es of five years . The minimum account size required to be include d in thi s composi te is $2 million . This composite was created September 1988. The name of this
composite was changed from Short-Term Fixed Income effective June 30, 2009 .
3. The ICE BAML 1-3 Year US Treasury Index tracks the performance of US dollar-denominated sovereign debt pub li cly iss ued by the US government in its domestic market . Qua lifying securi ties must have at least one year
remaining term to final maturity and less than three years remaining term to final maturity, a fixed coupon schedule, and a mini mum amount outstanding of $1 billion . Qualifying securiti es must have at least 18 months to
final maturity at the time of i ssuance. Indexes are referred to for comparati ve purposes only and are not intended to parallel the risk or investment styl e of the portfolios in the Composite. In dexes do not utilize leverage .
In dex calculations do not reflect fees, brokerage comm i ss ions or other expenses of investing. Investors may not make direct investments into any index. Index data conta ined herein (and all trademarks related thereto) are
owned by the in dicated index provider, and may not be redistributed . The information herein has not been approved by the index provider.
4. Valuations are computed and performance reported in U.S. Dollars .
5. Performance is calculated using a t ime-weighted tota l rate of return, wh ich links performance monthly, and i s reported gross of investment management fees and custodial fees, but after all tradi ng expenses. Results reflect
the reinvestment of income, dividends and other earn ings, and include rea lized and un real ized gains and losses and interest accrued through the last day of each month. Results do not reflect the potential impact of taxes .
Past performance is not indicative of future results . Fees charged by Chandler Asset Management will reduce performance.
6. Net-of-fees performance returns are calculated by reducing the monthly gross performance by one-twelfth (1/12) of the actual maximum applicable fee of 0.25%, whi ch is represe nta t ive of our current fee schedule for this
composite. These monthly returns are then geometrically li nke d to produce annual returns which are prese nted before custod ial fees but after management fees and all trading expenses . Fees are negotiable and add itional
information regarding Chandler's fee s is inclu ded in ou r Part 2A of Form ADV.
7. Dispers ion i s calculated using the asset weighted standard deviati on of annual gross re turns of those portfolios that were incl uded in the composite for the entire year. for years when less than six portfolios were incl uded in
the composite for the full year, no dispersion measure is prese nted. The three-year annualized standard dev iation measures the variab ility of the composite gross returns and the benchmark returns over the preceding 36 -
month period . Policies for valuing investments, calcu l ating performance, and preparing GIPS reports are available upon request.
8. GIPS• is a reg istered trademark of CFA Institute. CFA Institute does not endorse or promote th is organization, nor does it warrant the accuracy or quality of the content contained herein.
Source ice Data Indices, LLC ("ICE "), used with permi ssion. ICE permi ts the use of ICE In dices and related data on an "as is" bas is; ICE, its affiliates and their respective third party suppliers discla im any and all warranties an d
represe ntation, express and/or implied, including any warranties of merchantability or fitness fo r a particular purpose or use, including the ind ices, index data and any data inclu ded in, related to, or derived therefrom . Neither
ICE data, its affiliates or their respective third -party providers guarantee t he quality, adequacy, accuracy, timeliness or completeness of the ind ices or the index data or any component thereof, and the indices and in dex data
and all components thereof are provided on an "as is" bas i s and licensee's use i s at licensee's own risk . ICE data, its affiliates and their respective third party do not sponsor, endorse, or rec ommend Chandler, or any of its
produ cts or services.
1-\analer Asset Managem n I .!6 54
GIPS® Composite Report: Short Term Bond
Annual Rates of Return 2010 through 2020
Returns 3 Year Annualized Dispersion Assets
Year Total Total Standard Deviation AssetWtd Number of Composite
End Gross Net Index Composite Index Std . Dev . Portfolios (MM)
2010 3 .97% 3 .70% 3.46% n/a n/a 0 .11% 33 1,906
2011 2.90% 2 .64% 3.19% 1.47% 1.65% 0.07% 32 1,866
2012 1 .80% 1.54% 0 .98% 1.18% 1.27% 0.26% 38 2,133
2013 0.04% -0.21% -0 .16% 1 .02% 1.10% 0 .08% 39 2,168
2014 1.42% 1.17% 1.24% 0 .96% 0 .99% 0 .07% 40 2,325
2015 1.15% 0 .90% 0.96% 1.11% 1.18% 0 .07% 44 3,403
2016 1.30% 1.04% 1.08% 1.24% 1.39% 0 .05% 49 4,131
2017 1.08% 0.83% 0.67% 1.19% 1.34% 0.11% 48 3,783
2018 1.53% 1.27% 1.55% 1.22% 1.40% 0.05% 48 3,485
2019 4.55% 4 .29% 4 .19% 1.22% 1 .39% 0 .19% 55 5,199
2020 4.43% 4.17% 4.22% 1.32% 1.70% 0 .11% 59 6,234
%of Firm
Assets
33 .12%
31.48%
33.17%
30.26%
26.14%
28.97%
32 .07%
27.62%
21.06%
26 .59%
28.05%
Firm
(MM)
5,755
5,929
6,431
7,165
8 ,894
11,747
12 ,882
13,698
16,551
19,552
22,227
Chandler Asset Management claims compliance with the
Global Investment Performance Standards (GIPS•) and has
prepared and presented this report in compliance with
the GIPS standards.
Chandler Asset Management has been independently
verified by ACA Performance Services for the period of July
1, 1997 through March 31, 2020. The verification report is
available upon request. A firm that claims compliance with
the GIPS standa rds must establish policies and procedures
for complying with all the applicable requirements of the
GIPS standards. Verification provides assurance on
whether the firm's policies and procedures related to
composite maintenance, as well as the calculation,
presentation, and distribution of performance, have been
designed in compliance with the GIPS standards and have
been i mplemented on a firm-wide basis. Verification does
not provide assurance on the accuracy of any specific
performance report.
1. Chandler Asset Management Is an independent investment adviser registered as such with the Securities and Exchange Commission under the Investment Adviser's Act of 1940. Registration with the SEC does not imply a
certain level of skill or training. Since 1988, Chandler Asset Management has provided fixed income investmen t management services to the public sector, as well as to foundations, endowments, individuals and
corpo ration s. A complete list and description of all of the firm's composites is available upo n request.
2. The Short Term Bond Composite is a composite of individually managed accounts with an average modified durati on approximately equal to the modified duration of the ICE Bank of America Merrill Lynch 1-5 Year US
Treasury & Agency Index and a maximum final stated maturity of individua l securities of five years . The minimum account size required to be inclu ded in this composite is $2 million. This composite was created In September
1995. The name of this composite was changed from 1-5 Year Government foed Income effective June 30, 2009 .
3. The ICE BAML 1-5 Year US Treasury & Agency Index tracks the performance of US dollar denominated US Treasury and nonsubordinated US agency debt issued in the US domestic market. Qualifying securities must have an
investment grade rating (based on an average of Moody's, S&P and Fitch). Qualifying securities must have at least one year remaining term to final maturity and less than five years remaining term to final maturity, at least
18 months to maturity at time of issuance, a fixed coupon schedule, and a minimum amount outstanding of $1 billion for sovereigns and $250 m illion for agencies. Indexes are referred to for comparative purposes only and
are not inte nded to parallel th e risk or investment style of the portfolios in the Composite . Indexes do not utilize leverage. In dex calculations do not reflect fees, brokerage commissions or other expenses of investing.
Investors may not make direct investments into any index. Index data contained herein (and all trademarks related thereto) are owned by the indicated index provider, and may not be redistributed. The i nformation herei n
has not been approved by the in dex provider.
4. Valuations are computed and performance reported in U.S. Do llars.
5. Performance is calculated using a time-weighted tota l rate of return, which links performance monthly, and is reported gross of investment management fees and custodial fees, but after all trading expenses. Results reflect
the reinvestment of income, dividends and other earnings, and include realized and un real ized gains and losses and interest accrued t hrough the last day of each month. Results do not reflect the potential Impact of taxes.
Past performance is not indicative of future results. Fees charged by Chandler Asset Management will reduce performance.
6. Net-of-fees performance returns are calculated by reduc ing the monthly gross performance by one-twelfth (1/12) of the actual maximum applicable fee of 0.25%, which is reflective of our current fee schedule for this
composite. These monthly returns are then geometrically linked to produce annual returns which are presented before custodial fees but after management fees and all trading expenses. Fees are negotiable and additional
Information regarding Chand ler's fees is included In our Part 2A of Form ADV.
7. Dispersion is calculated using the asset weighted standard deviation of annual gross returns of those portfollos that were included in the composite for the entire year. For years when less than six portfolios were i nclu ded In
the composite for the full year, no dispersion measure is presented. The three-year annualized standard deviation measures the variability of the composite gross returns and the benchmark returns over the preceding 36-
month period . Policies for valuing investments, calculating performance, and preparing GIPS reports are available upon request.
8. GIPS• is a registered trademark of CFA Institute. CFA Ins titute does not endorse o r promote this organization, nor does it wa rran t the accuracy or quality of the content contained herein.
Source i ce Data Indices, LLC ("ICE"), used with permission. ICE permits the use of ICE Ind ices and related data on an "as is" basis; ICE, its affiliates and the ir respective third party suppliers disclaim any and all warranties and
representation, express and/or Implied, including any warranties of merchantability or fitness for a particular purpose or use, including the in dices , index data and any data included i n, related to, or derived therefrom . Ne ither
ICE data, its affiliates or their respective third-party providers guarantee t he quality, adequacy, accuracy, timeliness or completeness of the indices or the i ndex data or any component thereof, and the indices and index data
and all components thereof are provided on an "as is" basis and licensee's use is at licensee's own risk. ICE data, its affiliates and their respective third party do not sponsor, endorse, or recommend Chandler, or any of its
products or services .
(.,1ct 101, I 1-\5 ~l fv I agt rn~r LI 55
CHANDLER
ASSET MANAGEMENT
CHANDLER ASSET MANAGEMENT I 800.317.47 47 I chandlerasset.com I info@chandlerasset.com 56