CC Resolution No. 17-050 Accpeting the City Investment Policy for the Other Post-Employmnet Benefits TrustRESOLUTION NO. 17-050
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO
ACCEPTING THE CITY INVESTMENT POLICY FOR THE OTHER POST-
EMPLOYMENT BENEFITS TRUST
WHEREAS, the City's Other Post-Employment Benefit Trust has available funds
to invest in accordance with principles of sound treasury management; and
WHEREAS, the City invests funds in accordance with provisions of California
Government Code Section 53600; and
WHEREAS, the City's Audit Committee reviewed and accepted the attached City
Investment Policy for the Other Post-Employment Benefits Trust on May 1, 2017.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Cupertino accepts the attached City Investment Policy for the Other Post-Employment
Benefits Trust dated June 6, 2017.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of
Cupertino this 6th day of June 2017, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST :
Members of the City Council
Vaidhyanathan, Paul, Scharf
None
Chang, Sinks
None
APPROVED:
~~tt_
race Schmidt, City Clerk
-~~cl~
Savita Vaidhyanath~
City of Cupertino
2) CITY OF CUPERTINO CITY COUNCIL
a) Adopt the Policy by resolution of the City Council on an annual basis .
3) PORTFOLIO MANAGER
The Portfolio Manager will be responsible for carrying out the activities related to the Portfolio in
accordance with the Policy including:
a) Manage the day-to-day investment of Portfolio assets in accordance with the Policy guidelines
and objectives included herein .
b) Exercise full investment discretion and prudence in the selection and diversification of
investments .
c) Promptly bring to the attention of the City Treasurer or designee any investment that is
subsequently downgraded and fails to meet the quality guidelines, along with a recommendation
of retention or disposal.
d) Provide on a quarterly basis the following investment reporting :
(i) Year-to-date rate of return
(ii) Annualized one, three, five, etc . rates of return
e) Provide annually to the City's Audit Committee a commentary and analysis of investment
performance to include an evaluation of the current and future investment environment and
potential impact of the investment environment on achievement of investment objectives .
Investment Policy Statement Review
The City's Audit Committee will review and the Cupertino City Council will adopt this Investment Policy
Statement at least annually to determine whether stated investment objectives are still relevant and the
continued feasibility of achieving the same . It is not expected that the Policy will change frequently. In
particular, short-term changes in the financial markets should not require adjustments to the Policy .
If at any time the Portfolio Manager finds the above guidelines too restrictive or possibly injurious to
investment returns, they should communicate that information immediately to the City's Audit Committee .
Adopted: le, / l.o / 0 l 1-
(} . (Date)
l __ /~J ~ By: __ / _______ /---_______ _
David Brandt
City Manager
Administrative Services Director
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INVESTMENT POLICY STATEMENT
City of Cupe1tino
CITY OF CUPERTINO
OPEB TRUST
Investment Guidelines
Page I of 5
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Investment Policy Statement
Overview
In response to the Government Accounting Standards Board (GASB) Statement Number ·
45 new disclosure requirements for Other Post-employment Benefit (OPEB) Plans , the City of
Cupertino has adopted a Section 115 Trust and Plan that seeks to satisfy these liabilities for certain
eligible employees
Executive Summary
Account Name :
Account Number:
Investment Authority:
Current Assets :
Time Horizon :
Target Rate of Return :
Communication Schedule:
U.S. Bank Portfol io Manager:
U.S. Bank Relationsh i p Manager :
City of Cupertino OPES Trust
6746035000
Full Investment Authority
$22.4 Million (March 2016)
Long-Term
7 %
Meetings will be conducted at least twice per year
Rick Rosenthal
rich a rd .rosenthal@ usbank .com
213-443-1848
Carolyn Co x
carolyn .cox@usbank.com
415-677 -3603
Investment Objective: 'Balanced'
This investment objective is des igned to provide a moderate amount of current income with moderate growth of capital.
Investors should have suffic ient tolerance for pri ce and return volatility and substantial periodic declines in investment
value . Th is objective is recommended for investors with a long-term time horizon .
The strategic asset allocation ranges and tactical targets for this objective are listed below :
Asset Class
Fixed Income
Equities
Rea l Estate
Commodities
Cash
C ity o f Cupe rtino
Range
20-40 %
50-70 %
0-15 %
0-10 %
0-10 %
Inves bnent Guide lin es
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Benchmark
Target
29 %
63 %
5%
2 %
1%
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Investment Guidelines
Overview
This document defines the investment policy, guidelines and performance objectives applicable to the
assets of The City of Cupertino's OPES Trust. The goal of this Policy is to create an investment framework
within which the assets can be actively yet prudently managed.
The purpose of this document is threefold .
• First, it will set forth an investment structure for managing the Portfolio assets . This structure is
expected to produce an appropriate level of overall diversification and total investment return over
the investment time horizon.
• Second, it will serve as to encourage effective communications between the organization and
parties involved with investment management decisions.
• Third, these guidelines will provide a framework to measure ongoing investment performance .
Within the constraints imposed by these policies, Investment Managers are expected to comply with all
applicable fiduciary and due diligence requirements under the "prudent investor" rules, which state:
"Investments shall be made with judgment and care, under circumstances then prevailing, which persons
of prudence , discretion and intelligence exercise in the management of their own affairs, not for
speculation, but for investment, considering the probable safety of their capital as well as the probable
income to be derived." All applicable laws, rules and regulations from various local , state, federal and
international political entities that may impact the Portfolio are to be adhered to.
Diversification
Your Portfolio Manager is responsible for maintaining the balance between the various asset classes
based on the investment objective's strategic asset allocation . As a general policy, the Investment Manager
will maintain reasonable diversification at all times by asset class, credit quality, issuer, sector , industry, and
country .
The following parameters shall be adhered to in managing the portfolio:
Fixed Income Assets
• The fixed income investments are to maintain intermediate-term average weighted duration ,
between three-seven years.
• At the time of purchase, no single fixed income issuer shall exceed 2% of the total market value of the
Portfolio , with the exception of U.S. Treasury or Agency obligations .
• The direct high-yield portion shall constitute no more than 10% of the total market value of the
Portfolio.
Equity & Growth Assets
• The domestic equity investments are expected to be diversified at all times by size , industry,
sector, and style (Large Cap, Mid Cap, and Small Cap).
• At the time of purchase, no individual equity security shall exceed 2% of the total market value of the
Portfolio .
• The international equity investments (including emerging markets) shall constitute no more than 20%
of the total market value of the Portfolio
• The real estate investments shall be captured through the use of diversified mutual funds or ETFs
investing in REITs; and shall constitute no more than 15% of the total market value of the
Portfolio .
• The commodities investments shall be captured through the use of diversified mutual funds or
ETFs; and shall constitute no more than 10% of the total market value of the Portfolio .
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Permitted Asset Classes and Security Types
Fixed Income & Cash Equivalent Investments :
• Domestic Certificates of Deposit (rated A-1/P-1 or better)
• Domestic Commercial Paper (rated A-1/P-1 or better)
• Floating Rate Notes
• Money Market Mutual Funds
• U.S. Treasury Bonds, Bills and Notes
• U .S. Agency (and Instrumentality) Discount Notes, Notes, and Bonds
• Treasury Inflation-Protected Securities (TIPS)
• Municipal Bonds and Notes
• Corporate Bonds
• Mortgage-Backed Bonds (MBS)
• Asset-Backed Bonds (ABS)
• High-Yield Bonds (rated B-/B3 or better)
• Dollar denominated Foreign Bonds and Notes
• Bond Mutual Funds
Equity Investments:
• Common & Preferred Stocks
• American Depository Receipts (ADRs)
• Domestic and International Equity Mutual Funds (Open and Closed)
• Emerging Market Equity Funds or Exchange Traded Funds (ETFs)
Alternative Investments :
• Commodities Mutual Funds or Exchange Traded Notes (ETNs)
• REIT Investment or Pooled Strategy or Fund of REITs
• Registered Hedge Funds or Hedge Fund of Funds
Prohibited Asset Classes and Transactions
The Investment Manager is prohibited from purchasing or holding any of the following types of
investments :
• Partnerships unless investing in Master Limited Partnerships invested in a mutual fund and limited in
scope and allocation of Portfolio based on asset class limitations of table above
• Letter stock and other unregistered securities; commod ities or other commodity contracts ; and short
sales or margin transactions
• Investments in the equity securities of any company with a record of less than three years continuous
operation, including the operation of any predecessor
• Investments for the purpose of exercising control of management
Duties and Responsibilities
1) CITY OF CUPERTINO AUDIT COMMITTEE
a) Establish , approve , and maintain investment objectives, guidelines, and polic ies (including this
Policy).
b) Appoint Investment Managers who can be reasonably ex pected to adhere to the investment
guidelines and meet the investment objectives as established.
c) Monitor the investment performance of the Portfolio and compare actual investment performance
relative to an appropriate benchmark inde x given the stated investment guidelines and objectives
set forth in this Policy.
d) Conduct a formal review of the Portfolio's asset allocation , investment structure and performance
annually or more frequently as the need arises .
e) Period ically review the Portfolio performance against objectives .
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