Item 59 - Annual Statement of Investment Policy

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City of Santa - Annual Statement of Investment Policy Page 14 July 1, 2022 - June 30, 2023 Code may be held until their maturity dates. 9.2 Disallowed Investments - Higher Perceived Risk Besides investments prohibited by statute, this policy disallows investments in the following due to a higher perceived risk: • Asset-backed securities (ABS) – securities supported by pools of installment loans or leases or by pools of revolving lines of credit; • Derivatives – financial instruments which have a principal and/or interest payment subject to uncertainty as to timing and/or amount including financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities); • Investment agreements – contracts regarding funds deposited by an investor often separated into those offered by banks and those offered by insurance companies commonly known as Guaranteed Investment Contracts (GICs) or Guaranteed Investment Agreements (GIAs); • Mortgage-backed securities – securities created when a mortgage or purchaser of residential real estate mortgages creates a pool of mortgages and markets undivided interests or participation in the pool, including principal only strips; • Reverse Repurchase agreements – agreements involving the borrowing of cash from a financial institution for the purchase of securities in which a financial asset is instead pledged as a collateral for a loan in which the roles of borrower and lender are reversed. Securities lending agreements – agreements allowing local agencies to earn incremental income on their investment portfolio by loaning securities in their portfolio to financial services companies for a limited time; • Unregistered securities – purchases of private resales of unregistered securities to institutions, such as Securities Act of 1933, Section 5, Rule 144A securities. 9.3 Prohibited Investment Practices Assets of the City shall not be invested pursuant to the following investment practices: • Trading of securities strictly for speculation or solely for the realization of short-term trading gains. • A contract providing for the compensation of an agent or fiduciary solely based upon the performance of the invested assets.