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8.3 Suitability Of Investments <br />Suitability, not simply return, is the standard for selecting investments for the <br />portfolio. The Executive Director for FMSA, and all other authorized investment <br />officials and supporting staff shall review the following when selecting or <br />recommending investments for the City: <br />Sufficient liquidity to meet current obligations <br />Appropriate level of market risk <br />Diversified portfolio <br />Legal investments <br />Market rate of return <br />The Executive DirectorforFMSA and his/herdesignees are not required to invest <br />in all the investment options authorized in this Statement of Investment Policy. <br />Selection will be based on cash flow characteristics, exposure to market risk, rate of <br />return, the technical ability of the staff responsible for administering the program, <br />and the availability of time and tools for staff to engage in conservative, but <br />effective, management of the City’sinvestment portfolio. <br />9.0PROHIBITED INVESTMENTS AND INVESTMENT PRACTICES <br />9.1Ineligible Investments - State Law <br />Certain investments, however,are prohibited by California Government Code <br />Section 53601.6. Accordingly, the City shall not invest in any inverse floaters, <br />range notes, or mortgage derived, interest-only strips.In addition, the City shall not <br />invest any funds in any security that could result in zero interest accrual if held to <br />maturity. However, prohibited securities that were purchased and are currently <br />held in the City's portfolio, as of the date of this policy adoption, which were <br />previously allowed under the California Government Code, yet are now prohibited <br />due to changes in the Code may be held until their maturity dates. <br />9.2Disallowed Investments - Higher Perceived Risk <br />Besides investments prohibited by statute, this policy disallows investments in the <br />following due toa higher perceived risk: <br />Asset-backed securities (ABS) – securities supported by pools of installment <br />loans or leases or by pools of revolving lines of credit; <br />Derivatives – financial instruments which have a principal and/or interest <br />payment subject touncertainty as to timing and/or amount including financial <br />instruments whose return profile is linked to, or derived from, the movement <br />of one or more underlying index or security, and may include a leveraging <br />factor, or financial contracts based upon notional amounts whose value is <br />*´«¸ ΐǾ ΑΏΐ9- <br />C¨³¸ ®¥ 3 ­³  ȃ !­­´ « <br />0 ¦¤ 13 <br />3³ ³¤¬¤­³ ®¥ )­µ¤²³¬¤­³ 0®«¨¢¸*´­¤ ΒΏǾ ΑΏ20 <br /> <br />