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<br />CITY OF SANTA ANA S~ATBMENT OF INVESTMENT POLICY <br />JULY 2008-2009 <br /> <br />OBJ:lCTIVES: <br /> <br />SAFETY OF PRINCIPAL Safety of principal is t::,e foremost <br />objective of the City of Santa Ana. Each investment transaction <br />shall be undertaken in a =er t~t seeks to ensure 'Oreservation <br />of capital in the overall portfolio. The objective-will be to <br />mitigate credit risk and interest rate risK. <br /> <br />A. Credit Risk <br /> <br />Credit Risk is the risk of loss due to t::,e failure of the security <br />issuer or backer. Credit risk may be mitigated by: <br /> <br />Limiting investments to the safest types of securities; <br />Pre-qualifying the financia: institutions. <br />broker/dealers, intermediaries. and adv:cscrs wit:' which <br />an entity will do business; and <br />Diversifying the investment portfolio so that poten=ia1 <br />losses on individua: securities will be minimi2ed. <br /> <br />B. Interest Rat.e Risk <br /> <br />Interest rate r~sk is the risk that the mar~t value cf securities <br />in the portfolio will fall due to changes in general intereat <br />rates. Interest rate risk may be mitigated by: <br /> <br />Structuring the Fund so tr.at 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 />se~rities. <br /> <br />The cast. flow is updated on a daily basis and will be considered <br />prior to the investment of securities, which w~lJ. reduce the <br />necessity to sell jnvestments for liquidity purposes. <br /> <br />~ . LIQUIDI!rY The investment portfolio shall remain sufficiently <br />liquid to meet all operating requirements that may be reasonably <br />anticipated. This is accomplished by structuring the port=olio so <br />that securities mature concurrent with cash needs to meet <br />anticipated demands (static liquidity). Further1r.ore, since all <br />possible cash demands cannot be ~~ticipated. the portfolio should <br />cons:.st larssly of securities with active secondary or resale <br />markets (dynamic liquidity) . <br /> <br />3. YIELD - The City's Fund shall be designed with the objective of <br />attaining a market-average rate of return throughout bud~etary <br />and economic cycles taking into account tr.e ~nvestment ",isk <br />constraints ar.d liquidity needs. Return on investme:J.t is of <br />least importance compared to the safety and liquidity <br />objectives described aboVe. Tt.e core of investments are <br />limit:ed to relatively low risk securities in anticipation of <br />earning a fair return relative to the ::isk being assumed. <br />Securities shall not be Bold prior to maturity with the <br /> <br />Resolution No. 2008-045 <br />Page 4 of 10 <br />