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CITY OF SANTA ~A S'i~AT~ENT OF INVES~ POLICY <br />JULY 2003-2004 <br /> <br />SA~-~T¥ 0F PRINCIPAL Safety of principal ~S the foremost <br />objective of the city of Santa Aha. Each investment transaction <br />shall be undertaken in a ma~er that seeks ko ensure preservation <br />of capital in the overall portfolio. The object,ye will be to <br />mitigate credit risk and interest rate risk. <br /> <br />A. Credit Risk <br /> <br />Credit Risk ~s the risk of loss due to %he failure of the security <br />issuer or backer. Credit risk may be mitigated by: <br /> <br />Limiting investments to tha safest t~rpes of securities; <br />Pre~0slifying the financial institutions, <br />broker/dealers, intermediaries, and advisors with which <br />an entity will do business; ~ld <br />Dzversifying the investment portfolio so that potential <br />losses on individual securities will be minimized. <br /> <br />B. Interest Rate Risk <br /> <br />Interest rate risk is the risk that the market value of securities <br />in the portfolio will fall due to changes in general interest <br />rates, interest rate risk ~?~y be mitigated by: <br /> <br />Structuring tho ~ur~d so that .securities mature to meet <br />cash requirements for ongoing operations, thereby <br />avoiding the need to sell securities on the open market <br />prior to maturity, and <br />By investing operating funds primarily in shorter-term <br /> <br />The cash flow is updated on a daily basis and will be considered <br />prior to thc investment of securities, which will reduce the <br />necessity to sell investments for liquidity purposes~ <br /> <br />LXQUIDITY ~ The ~nvestment portfolio' shall =~l~in sufficiently <br />liquid to meet all operating requirements that may be reasonably <br />antmcipated. This is accomplished by structuring the portfolio so <br />tP~t securities matur~ Concurrent with cash needs to meet <br />anticipated demands (static liquidity). Furthermore, since all <br />possible cash dewmnds cannot be anticipated, the portfolio should <br />consist largely of securities with active seconda~! or resale <br />[*~rkets (dynamic liq~idityl . <br /> <br />YIELD - The City's Fund shall be designed with the objective of <br />attaining a market-average rate of return throughout budgetary <br />and economic cycles taking into account the investment risk <br />constraints and ]~idity needs. Return on invesument is of <br />least importance compared to the safety and liquidity <br />objectives described above. The core of investments are <br /> <br />Resolution No. 2003-056 <br /> Page 5 of 11 <br /> <br /> <br />